Page 20 - PowerPoint Presentation

THE CONCEPTUAL FRAMEWORK

Capital Maintenance

Alternatives to historical cost accounting

• There are two main forms of current value accounting which seek

to tackle the disadvantages of historical cost accounting.

• Constant Purchasing Power (CPP)

• Figures in the financial statements are adjusted to reflect

amounts with the same purchasing power, using a general

price index.

• In this way the financial statements reflect the impact of

inflation, although it is only a general inflationary impact.

• Current Cost Accounting (CCA)

• All costs in the statement of profit or loss are adjusted to show

the value of assets consumed during the period, based on

current rather than historical values.
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