A cross-national test of determinants of inflation accounting practices

Abstract

This paper develops a model to identify characteristics that may affect inflation accounting practice among countries. Parametric and nonparametric tests are conducted to determine the effect of inflation rate, national culture, legal system, economic system, accounting system, and other accounting policies on inflation accounting practice. Countries that use price level adjustment have higher inflation than countries that use historical cost or historical cost with some revaluation. The results indicate that national culture, accounting system, economic system, and financial statement disclosure are also important factors in explaining the cost basis used by businesses operating in various countries.