Český finanční a účetní časopis 2022(2):5-18 | DOI: 10.18267/j.cfuc.574

20th century approaches to accounting for the effects of inflation

Jaroslava Janhubová, Miloslav Janhuba

Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví, katedra finančního účetnictví a auditingu, Praha

Paper deals with the effects of inflation on business management and the ways of expressing them in financial statements from a historical point of view. It points to the constructions of classical balance sheet theories, which arose as a reaction to the development of inflation in Germany after the First World War, with special attention to one of them: the organic balance sheet theory Schmidt’s, first published a hundred years ago. The organic balance sheet is in many respects the predecessor of the contemporary reporting of value data mainly in the proper (real) price [fair value], with the fact that Schmidt also derived the determination of the "correct" income from the current prices (Tageswert). The issue of the variable purchasing power of the monetary unit is still alive, as is the effort to deal with this phenomenon within the framework of financial reporting. At the end of the twentieth century, complex accounting valuation models created in Europe and the USA, built on dynamic reporting principles together with the use of sophisticated calculations to determine reported values. The issue supplements a small illustrative example, using methodology from the USA.

Keywords: Valuation; Balancing; Inflation; Capital maintenance; Income.

JEL classification: M41, O44

Received: September 22, 2022; Revised: October 10, 2022; Accepted: October 12, 2022; Prepublished online: December 24, 2022; Published: February 4, 2023  Show citation