Managerial Uses and Limitations of Uniform Dollar Accounting Data.

Due to a number of factors which vary widely with the nature of the market that a firm enters, the usefulness of adjustments to conventional accounting data for price policy is limited. Dividend policy and stockholder relations seem to be a fruitful area for use of data expressed in real terms. Because of special circumstances surrounding wage negotiations, applications are limited, although employee relations present an opportunity to utilize some adjusted data. Uses of uniform-dollar figures as an adjunct to conventional data have a potential for capital budgeting, but care must be taken in the interpretation of the results not to overlook the complexity introduced by technological changes. The usefulness to management of adjusted accounting data for government negotiations is contingent on government policy. Real data may be used as a basis for proposing tax reforms and are appropriate for contract renegotiations. Any attempt to measure the impact of price level changes on accounting data can be only an approximation. No result derived from a process of measurement may be presumed to be exact. The supposedly objective measurement of net income by conventional accounting methods may contain a substantial error. The measurement of real income must be even less refined, for the error is compounded by lack of precision in measuring the extent of price level changes. Yet an objective technique, crude as it may be, may more accurately indicate the effects of price level changes than a purely subjective evaluation. The business executive, provided with a reasonably objective measure of real income, should be better equipped to render current and future decisions. These data may only confirm what he had already surmised, but even in this event, they should instill greater confidence in the actions taken.