Price-Level Changes And Useless Information

Accounting Research Study No. 6 was prepared as the result of a directive by the American Institute's Accounting Principles Board to the Director of Accounting Research. After stating that the Board . . . agreed that the assumption in accounting that fluctuations in the value of the dollar may be ignored is unrealistic," this directive instructed the Director "to set up a research project to study the problem and to prepare a report in which recommendations are made for the disclosure of the effect of price-level changes upon the financial statements. In this study, special attention should be paid to the use of supplementary statements as a means of disclosure." 1 The directive thus indicated the broad lines along which the study was to proceed; it restricted the inquiry to an examination of the effect of "fluctuations in the value of the dollar" (or, by implication, the effect of changes in the general price level as opposed to the effect of price changes