General price level method
Specific price level method
Current cost accounting method
Generally accepted accounting principles
Answer is Wrong!
Answer is Right!
The correct answer is: B. Specific price level method
The Sandilands Committee was a committee of inquiry set up by the UK government in 1974 to investigate the implications of inflation for financial reporting. The committee’s report, “Inflation Accounting”, was published in 1975.
The committee recommended that companies should use the specific price level method of inflation accounting. This method measures the effects of inflation on the historical cost of assets and liabilities by restating them in terms of the purchasing power of the currency at the end of the reporting period.
The other options are incorrect because:
- The general price level method measures the effects of inflation on the historical cost of assets and liabilities by restating them in terms of the general purchasing power of the currency over the period.
- Current cost accounting measures the effects of inflation on the historical cost of assets and liabilities by restating them in terms of the current cost of replacing them.
- Generally accepted accounting principles (GAAP) are a set of accounting standards that are used by companies to prepare their financial statements. GAAP do not specifically address the issue of inflation accounting.