Inflation Accounting


DEFINITION of 'Inflation Accounting'

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.

  1. Cost Accounting

    A type of accounting process that aims to capture a company's ...
  2. Inflation

    The rate at which the general level of prices for goods and services ...
  3. Deflation

    A general decline in prices, often caused by a reduction in the ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise ...
  5. Inflation-Adjusted Return

    A measure of return that accounts for the return period's inflation ...
  6. Line Graph

    A graph that measures change over time by plotting individual ...
Related Articles
  1. Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull Inflation

    Gain a deeper understanding of aggregate supply and demand, forces which raise the price of goods and services.
  2. Options & Futures

    The Consumer Price Index: A Friend To Investors

    As a measure of inflation, this index can help you make key financial decisions.
  3. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  4. Forex Education

    How Inflation-Fighting Techniques Affect The Currency Market

    Central banks use these strategies to calm inflation, but they can also provide longer-term clues for forex traders.
  5. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  6. Professionals

    Accounting Research Manager: Job Description & Average Salary

    Learn about the average salary of an accounting research manager as well as the necessary skills, experience and education, and licenses to hold this position.
  7. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  8. Professionals

    Common Interview Questions for Financial Auditors

    Identify questions commonly asked at financial auditor job interviews, and learn to formulate winning responses that give your candidacy a boost.
  9. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  10. Investing Basics

    Why Interest Rates Affect Everyone

    Learn why interest rates are one of the most important economic variables and how every individual and business is affected by rate changes.
  1. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  2. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  3. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  4. Are Canadian Pension Plans inflation-protected?

    The Canada Pension Plan protects pension holdings against inflation and adjusts its annual rates for inflation. The Canada ... Read Full Answer >>
  5. When is the best time to invest in inflation-protected securities?

    Investment timing decisions are among the most challenging faced by investors as they have a significant impact on ultimate ... Read Full Answer >>
  6. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
Trading Center