Financial Reporting and Changing Prices Flashcards
What is Historical cost?
The actual exchange in value in the dollars at that time an asset was acquired or a liability was assumed
What is Current Cost?
The cost that would be incurred at the present time, the replacement cost
What is Nominal Dollars?
Unadjusted for changes in purchasing power
What is Constant Dollars?
Dollars restated based on calculations of CPI ratios
What is Historic Cost/Nominal Dollars method of measuring prices based on?
Historical prices without restatement for changes in purchasing power
What is Historical Cost/Current Dollars method of measuring prices based on?
Historical prices adjusted for changes in purchasing power
What is Current Cost/ Nominal Dollars method of measuring prices based on?
Current cost without restatement for changes in purchasing power
What is Current Cost/ Constant Dollars method of measuring prices based on?
Current cost adjusted for changes in purchasing power
What are monetary assets and liabilities?
Assets and liablilities that are fixed or denominated in dollars regardless of changes in specific prices or the general price level
How would holding monetary assets affect purchasing power in times of inflation?
It will result in loss of purchasing power
How would holding monetary liabilities affect purchasing power in times of inflation?
It will result in gain of purchasing power
What are non-monetary assets and liabilities?
Assets and liabilities that fluctuate in value with inflation and deflation
