Inflated Accounts: A History of Financial Reporting in an Age of Rapidly Changing Prices

ABSTRACT

Inflation is a longstanding and difficult challenge for accounting theorists, practitioners, and standard setters. Historically, inflation accounting has been divisive, not only complex in terms of theory, but also time-sensitive and difficult to execute. High levels of inflation are predominantly epochal and temporary, but unlike past episodes of inflation, the 2021 resurgence of inflation in the United States has not resulted in a reprisal of interest in inflation accounting. In light of the current silence among constituents and accounting standard setters, this article revisits past efforts to address inflation within financial reporting to understand and contextualize the process, pitfalls, and outcomes of introducing an inflation standard. Particular attention is paid to the experimental SFAS 33. Despite earnest efforts and experimentation, agreement on a solution to resolve the challenge of accounting for inflation and changing prices remains evasive.

Data Availability: Data are available from primarily public sources, university databases, and by request from the FASB library.