inflation

[Stuart McGraw]

Phil Longstaff wrote:
> Charles Day wrote:
>> On Fri, Aug 29, 2008 at 11:56 AM, Stuart McGraw <smcg4191 at frii.com> wrote:
>>
>>   
>>> 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.
>>>
>>>     
>> If all you want is to see inflation-adjusted reports, then it doesn't seem
>> like it would be too hard for some enterprising person to add an option to
>> specify a percentage and have each number in the report adjusted
>> accordingly, i.e. for 6% inflation divide each number by 1.06. Someone just
>> has to volunteer to do it. I suspect the main developers are too busy with
>> what they already have on their plate. (I know I am.)
>>
>> If you don't want to try doing that work yourself, you could file an
>> enhancement request (a bug report) in Bugzilla so the idea doesn't get
>> lost.  http://bugzilla.gnome.org
>>   
> This is now starting to move from an accounting app to a financial 
> analysis app.  Accounting is supposed to capture and categorize 
> transactions to provide an accurate financial record.  Accounting 
> doesn't really take inflation into account because it is irrelevent.

That seems a rather narrow definition in that I can't
imagine an accounting application that did not provide
at least basic summarizing of transactions.

But regardless, should I understand your response as
saying that accountants don't generally do anything
special in times of high inflation?  (Does anyone
from Zimbabwe read this list? :-)