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Management Accounting


How is price-adjusted information required by FAS 33, “Financial Reporting and Changing Prices,” being used for management decision-making purposes? I mailed a questionnaire survey to the controllers of all companies in the FASB's Statement 33 bank to find out the answers and to examine the company characteristics associated with such use. The questionnaire was designed to find out the extent of use and reporting of FAS 33 information for internal company purposes such as management decision making and the factors that might be associated with that use and reporting.

The controllers were asked about the extent of internal use and reporting by their companies of FAS 33 information. The respondents were asked to indicate the extent of their use and reporting on a seven-point scale from 1 or “never” to 7 or “always.” In general, very little use or reporting of FAS 33 information was revealed. It was hypothesized that usage of FAS 33 information might differ among the companies according to the types of decisions for which information was required. Some decisions may be readily adaptable to the use of FAS 33 information, while others may not be. However, the questionnaire responses did not reveal much difference in the extent of usage for various decision types.

The decision types included adjustment of insurance coverage, capital investment decisions, product pricing and sales decisions, other purposes, make-or-buy decisions, and determining cash dividends. It is ironic that the least usage of FAS 33 information among the decision types was reported for “determining cash dividends” because much of the literature on inflation accounting has stressed the paramount importance of inflation adjustments to avoid excessive dividend payouts and thereby impairment of original capital resulting from the use of net income based on inflated historical cost.

Another hypothesis of this study was that companies’ use of FAS 33 information would differ by organizational level. It was assumed that because F AS 33 information always would be available on a companywide basis, the greatest use would be at the headquarters level. The use by company units would be less frequent because of an assumption that the FAS 33 information may not be assembled for those units. The questionnaire responses, however, give little support to this hypothesis.

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The journal Management Accounting was renamed Strategic Finance in March 1999. The National Association of Accountants was renamed the Institute of Management Accountants in the 1990s. This article was made available for download with the permission of the Institute of Management Accountants; any content from the article must be attributed properly.

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National Association of Accountants, now known as the Institute of Management Accountants

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