General price level adjustment

General price level adjustment

General price level adjustment

General price level adjustment
General price level adjustment

General price level adjustment
Currency amount to be adjusted to changes in the general price level (referred to as purchasing power constant currency historical cost or equivalent general purchasing power). Amount of currency that have not been adjusted in such a manner is referred to as the nominal amount.

Object of the general price level adjustment
Now look again briefly the conventional terms of profit. Traditionally, profit (ie wealth that can be used) is part of the company’s assets (ie net assets) that can be withdrawn by the company during the accounting period without reducing the wealth to be under the starting position.

Thus, the conventional accounting measure of profit as the maximum amount that can be drawn from the company without reducing the amount of money into capital initially. Capital cost of constant purchasing power historical considers this difference by measuring the difference in earnings that the company is able to pay all its earnings as dividends while the purchasing power at the end of the period equal to the initial period.

Newest Adjustment costs
Current cost of capital with that of conventional accounting in two major aspects. First, assets are valued based on current cost rather than historical cost. Second, profit is the amount of resources that can be distributed by the Company during the period regardless of konponen taxes), but still able to maintain the productive capacity of the company. One cata to maintain the capital is to adjust the initial net asset position of the company (which uses the exact price index specific or direct pricing) to reflect changes in current cost equivalent assets during the period.
Current cost profit for the amount that can be used by the company without compromising its business operations. Thus, the cost model is now trying menpertahankan physical models or productive capacity of the company. Examples that show the current cost reporting presented by a Swedish manufacturing company:
1. supply items are judged by the end of the last entry method, the first exit and re-presented using the method of replacement cost or manufacturing. Repeated presentation of such does not exceed market value.
2. repeated presentation of cost of goods sold account is assessed based on the restated value of inventories
3. Property and equipment are recorded po-mail based on the cost of acquisition and are presented using the inflation factor derived from the NCPI.
4. Depreciation. This post re-calculated based on the presentation of fixed assets is considered as a basis, the useful life of thought is determined by an independent appraiser.
5. Repeated presentation of shareholders’ equity. This account is presented again by using an inflation factor derived from the NCPI, according to the age or date of contribution). Effect of repeated presentation of these financial statements are presented in the consolidation, in each of the accounts that give rise to an increase of this post.

Sumber : https://pitchengine.com/bloggings/2019/11/07/education-is-the-step-towards-evolution/002518291996124801335