Dr. C. Agyenim-Boateng With their capitalist ship slowly sinking from the weight of inflation, company directors and accountants are at last doing something about the problem. They are not exactly finding a way to overcome it, but they have decided on a way of recording the effects of inflation in company accounts. Members of the Institute of Chartered Accountants in Ghana at their annual congress last weekend and a panel of directors at the Institute of Directors in Ghana in a round table discussion at the University of Ghana, Legon on Wednesday called for the introduction of some form of accounting for inflation. At present there is a preliminary exposure draft of one such form of accounting Changes in the Purchasing Power (CPP) of Moneydistributed by the Institute of Chartered Accountants and the Ghanaian Society of Accountants. Under CPP, figures are adjusted by an index to a constant purchasing power. Another such draft of another form of inflation accounting, the replacement cost (RC), that is the current cost (CC) approach, is expected within a few months and hopefully, some decision will be made after that as to what form of accounting will be encouraged. RC accounting aims at showing the replacement value of non-monetary assets expected to be replaced with consequential adjustment to profits. As the ICAG pointed out at its annual congress, a company reporting a steady profit in times of 20 per cent inflation would show adjusted earnings actually 20 per cent lower under the new schemes. The present historical cost accounting, where companies compare different cedi values without converting them by any inflation exchange rate, has left some companies effectively to pay dividends out of capital. Over two hundred directors at the institutes seminar at the Kata Hotel, Accra, were told until companies start to show the real effect of inflation on their earnings they could not hope to see any government moves similar to that of Nigeria where an index of inflation is declared each quarter. Mr. Oduro-Boateng, CA, a Partner with Sandra, Delvin and Associates. (SDC), told them: I foresee that more and more companies will be seeking capital issues merely to maintain their level of operations. This is in a capital market where confidence has been severely shaken and which is in doubt as to whether the industry can now earn an adequate return to service capital in real terms. To add to the problem no recognition is given to our taxation policy to the effect that inflation exerts. The rate of 25 per cent after a hopelessly inadequate reduction of 2.5 per cent is significantly higher on real earnings he said. Required As a seasoned accountant who has studied various theories of accounting, you have been invited by the Institute of Chartered Accountants and the Ghanaian Society of Accountants to deliver a paper at the Contemporary Issues in Accounting Conference on the alternatives to historical cost accounting. In your paper, you are required to highlight the limitations of the historical cost accounting approach and to discuss the strengths and weaknesses of the alternatives to the historical cost approach.