In January 1979, the Financial Accounting Standards Board circulated an exposure draft proposing supplementary disclosure of the effects of changing prices on financial statement numbers. The draft considers two broad approaches to disclosing these effects—(1) changing the measuring unit from nominal dollars to units of general purchasing power, sometimes called “constant dollars,” or (2) changing the cost basis from historical cost to current cost, or some other measure of current value.

The first section of the article discusses the problems of accounting for changing prices, illustrating seven measures of income and how some of these measures would be disclosed under the Standards Board’s proposal. The second section gives the results for the 30 Dow Jones industrial companies, analyzes those results and comments on the proposal itself.

The authors argue that the SEC should allow companies to substitute Standards Board current cost disclosures for SEC replacement cost disclosures. Current cost disclosure would then appear more attractive to firms subject to Standards Board disclosure rules because it would satisfy both sets of requirements, in effect killing two birds with one stone. In the unlikely event that the SEC accepts the Standards Board’s constant dollar presentation in place of its own ASR 190 presentation, however, the authors expect widespread use of constant dollar disclosure.