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1 March 1983 Financial Analysts Journal Volume 39, Issue 2

Applications of Inflation-Adjusted Accounting Data

  1. William C. Norby, CFA

To date, the investment community has exhibited little interest in the constant dollar disclosures required by Financial Accounting Standards Board Statement No. 33. Current cost data are, however, being employed (if sparingly) in company analysis, portfolio management and macro analysis. Callard, Madden & Associates, for example, has incorporated current cost data in its discounted cash flow approach. And both Citizens and Southern National Bank and Easman Inflation Consultants have used such data to enhance their dividend extrapolation models.

The list of active users of inflation-adjusted data is admittedly short. It may be, however, that the advantages of current cost financial statements as a reflection of economic reality during inflation will become more apparent over the long term, as the effects of inflation on year-to-year financial results cumulate.

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