国际会计作业第四章作业

The historical-cost accounting model, which dominates financial reporting practice in most countries, does not account for changes in the purchasing power of the monetary unit that is used in the financial statements. As is evident in any historical-cost-based financial statement, when monetary amounts from different time periods are added there is an implicit assumption that these amounts are homogeneous and are additive.

2、How?

The GPLA model attempts to account for changes in the general purchasing power of the reporting currency over time. Since it deals with general price changes, the model uses a summary measure of inflation such as a consumer price index. It aims to address an important weakness of the historical-cost model which ignores changes in the purchasing power of the reporting currency over time. As discussed above, the historical-cost model requires adding monetary amounts from very different time periods even though the sum resulting from these additions has little information content.

The strengths: It is an improvement on the historical-cost model by converting nominal amounts into a constant purchasing power.

The weaknesses: It does not deal with specific price changes of assets. 3、Monetary items are those items that are contractual obligations, such as cash, accounts receivable, and all payable. Monetary items are not adjusted for inflation in the GPLA model and, thus, appear at their original nominal amounts. All other financial statement items are non-monetary and must be adjusted in the GPLA model reflect the effect of inflation. Monetary items : Cash 、Accounts Receivable 、Accounts Payable.

Non-monetary items : Marketable Securities 、Merchandise Inventory、Obligation to Deliver Goods in the Future 、Land 、Prepaid Rent 、Prepaid Subscription.

General Price Level Adjusted Balance Sheet:

December 31,1999 Historical Cost Adjustment Ratio P-L-A Basis Assets: Cash and cash equivalents 2500 Not restated 2500 Accounts receivable 19460 Not restated 19460 Prepaid expenses 600 110/104 630 Inventory 10280 110/104 10900 Supplies 300 110/104 320 Equipment 24500 24500*110/100 26950 Less: Accumulated dep (5000) 5000*110/100 5500 Total assets 52640 55260 Liabilities and Owners’Equity: Liabilities: Account payable 15000 Not restated 15000 Accrued liabilities 8250 Not restated 8250 Band loan payable 12750 Not restated 12750 Bonds payable 7340 Not restated 7340 Owners’ Equity: Paid-in capital 7500 110/100 8250 Retained earnings 1800 Reconciliation item 3670 Total liabilities and 52640 55260 owners’ equity Whilips’ GPLA basis retained earnings balance in millions Dutch guilders: 55260-8250-7340-12750-8250-15000=3670

General Price Level Adjusted Income Statement:

For the Year Ending December 31,2000 Historical Cost Adjustment Ratio P-L-A Basis Net sales 7820 108/105 8000 Cost of goods sold (4000) 108/105 (4100) Selling, general administrative 850 108/105 870 Rent 400 108/105 410 Advertising 150 108/105 150 Equipment depreciation 1250 1250*108/100 1350 Interest expense 90 108/105 93 Utilities 30 108/105 31 Federal income taxes 65 108/105 67 Net operating income 985 929 Add: Net monetary gain N/A 480 Conventional net income 985 P-L-A net income 1409

(1)、Latechoc's adjusted GPLA net income for the year ending December 31, 2000: 8000-4100-870-410-150-1350-320-93-31-67=929 （2）、Net monetary gain for 2000 : 985*108/100=1060 480*108/105=490

1060+490-(985+480)=85 （3）、Latechoc’s GPLA-based net income for the year ending Dec.31,2000 :929+480=1409