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Investments glossary

Inflation Accounting


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— Chris Kilham

Inflation accounting is a special technique used to factor in the impact soaring or plummeting costs of goods in some regions of the world have on the reported figures of international companies. Financial statements are adjusted according to price indexes, rather than relying solely on a cost accounting basis, to paint a clearer picture of a firm’s financial position in inflationary environments. This method is also sometimes referred to as price level accounting.

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