The Accounting Review Vol. 44 No. 1 1969
Statistical Criteria for Asset Valuation by Specific Price Index.
Abstract
The article discusses the statistical criteria for asset valuation by specific price index. The major theoretical studies of current cost asset valuation in financial reporting rely to some degree on specific price indexes, but have left unsettled certain key issues in implementation. A survey of published implementation studies shows indexes as the dominant adjustment method. This article makes a limited investigation of the potential for measurement of individual asset valuation by specific price indexes for machinery and equipment from the Wholesale Price Index (WPI). The WPI offers the best available source of price indexes to illustrate adjustment procedures. The net overall asset valuation adjustment provides a purchasing power measure specific to whatever group of assets the price index coverage represents, but general with respect to any single asset. The standard deviation of the weighted price relatives making up the index can serve to summarize the gross error in the absolute sum of adjustments to individual asset valuations of an asset group. The individual asset valuation adjustment provides an estimate of the price change specific to the individual asset, but in common practice is based upon the adjusting price index. The probabilistic estimation of specific price indexes by the firm provides advantages of statistical criteria for asset valuation adjustments not available from existing published price indexes.
- DOI
- 10.2308/tar-4492088
- Volume
- 44
- Issue
- 1
- Pages
- 99-123
- Language
- en
- Sources
- openalex crossref