proposal111.rtf - ` THE IMPACT OF INFLATION ON THE FINANCIAL STATEMENTS ANALYSIS(Case Study at Dal Food Company CHAPTER ONE RESEARCH PROPOSAL

proposal111.rtf - ` THE IMPACT OF INFLATION ON THE...

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`THE IMPACT OF INFLATION ON THE FINANCIAL STATEMENTSANALYSIS (Case Study at Dal Food Company)
CHAPTER ONERESEARCH PROPOSALIntroductionBackground:Inflation describes a sustained continuous upward movement in pricesshared by all components of the aggregate price index (or GNP deflator).(Macroeconomics By Robert J. Gordon)When the general price level rises, each unit of currency buys fewer goodsand services; consequently, inflation reflects a reduction in the purchasingpower per unit of money – a loss of real value in the medium of exchangeand unit of account within the economy. (5^Why price stability?ArchivedOctober 14, 2008, at the Wayback Machine, Central Bank of Iceland,Accessed on September 11, 2008.6 ^Paul H. Walgenbach, Norman E. Dittrich and Ernest I. Hanson, (1973),Financial Accounting, New York: Harcourt Brace Javonovich, Inc. Page 429."The Measuring Unit principle: The unit of measure in accounting shall bethe base money unit of the most relevant currency. This principle alsoassumes that the unit of measure is stable; that is, changes in its generalpurchasing power are not considered sufficiently important to requireadjustments to the basic financial statements.")Inflation affects economies in various positive and negative ways.(). In addition, theysubstantially affect the financial statements of any company. Accountants in
the United Kingdom and the United States have discussed the effect ofinflation on financial statements since the early 1900s. Inflation accountingcomprises a range of accounting models designed tocorrect problems arising from historical cost accounting in the presence ofhigh inflation and hyperinflation.[1][2]For example, in countriesexperiencing hyperinflation the International Accounting Standard Board

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