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PROPOSALS FOR NEW ACCOUNTING STANDARDS FOR FOREIGN MONETARY ITEMS
Author(s) -
Oxelheim Lars
Publication year - 1983
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1983.tb00428.x
Subject(s) - purchasing power parity , economics , closing (real estate) , interest rate parity , relative purchasing power parity , exchange rate , international fisher effect , accounting , econometrics , interest rate , monetary economics , fisher hypothesis , financial economics , macroeconomics , real interest rate , finance
The purpose of this study was to propose and evaluate different methods for measuring and reporting exchange gains and losses on corporate monetary items. Focusing on the Swedish experience, the empirical validity of three laws/monetary relationships from economic theory were examined for currencies in the Swedish ‘basket’ for the period 1974–1981. The basic overall finding of the study was that a method based on the Purchasing Power Parity Theory appears generally superior to methods based on either Fisher's Open Relationship or the Interest Rate Parity Theory, and also superior to the currently favoured use of the closing rate.