inflation

[Stuart McGraw]

Tommy Trussell <mailto:tommy.trussell at gmail.com> wrote:
> On 8/27/08, Stuart McGraw <smcg4191 at frii.com> wrote:
> > It appears that the USA and other places in the
> >  world may be headed for a period of high inflation.
> >  So I would like to ask,
> >
> >  * Are there any special standard practices for
> >   accounting during inflationary periods?
> >
> >  * Does Gnucash support these practices?
> 
> I hope an actual accountant weighs in, but in my opinion accounting
> practices would not apply here because 1USD=1USD, or 1EUR=1EUR that is
> UNTIL you trade it for something else. The problems you run into is
> how to handle an exchange for one item to another as efficiently as
> possible. When you're talking stocks, you don't know the actual final
> price until everything "settles" after the trade. If you're trying to
> estimate your current net worth in terms of another unit, such as how
> much your stocks are worth in US Dollars, Australian Dollars or Euros,
> you're depending upon someone's estimate of what those items might
> have traded for, 15 minutes, 24 hours, or 30 days ago.

One area I expect inflation would affect is year-to-year financial
comparisons.  If inflation is 15% per year, a revenue report might
show a 15% increase when in fact there has been no real revenue
growth.  If the purpose of financial reports is to provide an accurate
picture of a business (or person's) financial condition (including
changes) then clearly it is failing to do so in an inflationary
environment. I was guessing that this is something accountants
may have developed some standard ways of adjusting for.  But I
can understand if this is beyond the scope of gnucash.