The Effects of Hyper-inflation on Accounting Ratios: Financing Corporate Growth in Industrial Economies, Volume 23

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IFC Technical Paper No. 3.Inflation plagues many of the developing countries in which the International Finance Corporation (IFC) operates. To date, however, little is known about the impact of inflation on the financial statements of firms in developing countries. The authors of this study have developed a simple algorithm, based on the method of inflation accounting used in Brazil, and have applied it to the accounts of listed companies in Turkey for the period 1982-90. The paper documents an inflation-induced bias in financial statements and introduces a methodology for adjusting corporate financial statements for inflation effects.

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About the author (1997)

Whittington is Price Waterhouse Professor of Financial Accounting at the University of Cambridge, and a Fellow of Fitzwilliam College, Cambridge. He is currently a part-time member of the Monopolies and Mergers Commission, and Academic Adviser to the Accounting Standards Board.