Constant Dollar Accounting


DEFINITION of 'Constant Dollar Accounting'

A method of accounting that measures financial statements in figures adjusted for inflation. Constant dollar accounting requires the conversion of historical non-monetary assets and liabilities to current dollar values. The conversion is generally done by using a price index, commonly the consumer price index (CPI). Monetary items, such as cash and cash equivalent items, are not adjusted.

BREAKING DOWN 'Constant Dollar Accounting'

Adjusting financial statements using constant dollar accounting allows analysts and investors to better compare companies that purchased assets in different years. However, one weakness of constant dollar accounting is that it relies on a general price index, such as the CPI, that may not accurately reflect the true price changes of their assets.

  1. Constant Dollar

    An adjusted value of currency used to compare dollar values from ...
  2. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  3. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  4. Accrual Accounting

    Accrual accounting is an accounting method that measures the ...
  5. Price-Weighted Index

    A stock index in which each stock influences the index in proportion ...
  6. Accounting Change

    A change in accounting principles, accounting estimates, or the ...
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