Inflation Accounting

What is 'Inflation Accounting'

Inflation accounting is special accounting techniques, which can be used during periods of high inflation. Inflation accounting requires statements to be adjusted according to price indexes, rather than rely solely on a cost accounting basis. Companies operating in countries experiencing hyperinflation, may be required to update their statements periodically, in order to make them relevant to current economic and financial conditions.

BREAKING DOWN 'Inflation Accounting'

Most developed countries have relatively stable rates of inflation. For countries with high rates of inflation, examining the books is difficult, because historical information is less likely to be relevant as prices increase rapidly.