Relevance Analysis of Inflation Accounting in Assessing Company Financial Statements

Abstract

Indonesia is a country that adheres to an open economy which brings Indonesia to the problem of inflation from year to year, while the accounting process in Indonesia generally adopts historical costs. This concept works with a stable monetary unit, it does not recognize changes such as the effects of inflation. All transactions that occur are recorded based on historical values ​​or values ​​obtained during transactions and bring the dilemma of relevance to the company's financial statements. For investors and stock traders, additional reports such as General Price Level Accounting are needed to determine their resilience in the face of unpredictable competition and monetary. This concept states that the true value of the Rupiah (IDR) is determined by the goods or services commonly known as purchasing power. During inflation or deflation, the quantity of goods/services can be obtained by changing the nominal value of money constantly, which means that the purchasing power of the rupiah changes. With this additional report, the purpose of the accounting report can be fulfilled, as a competent reference for making the right decisions.

Keywords: Accounting, inflation, financial statements