Q1.

Excerpts from Welsh Slate Ltd.'s statement of financial position for the year ended 31 Dec 2021 showed non-current assets of EUR150,000 (acquired on 1 Jan 2021), before depreciation of EUR50,000 for the year. The company had no inventory brought forward from 2020 and made purchases totally EUR60,000, which accrued evenly throughout 2021. Closing inventory, valued at EUR20,000, was acquired on 30 Nov 2021. The company's financial director also provides you with the following price change indices for 2021, one representing the general retail price index, and the other, a specific index to reflect the replacement cost for all of the company's assets.

Date --> Retail Price Index --> All Assets

1 Jan --> 100 --> 100

30 June --> 120 --> 140

30 Nov --> 140 --> 150

31 Dec --> 160 --> 180

REQUIRED:

a) How does Current Value Accounting (CVA) and Current Purchasing Power Accounting (CPP) attempt to deal with the issue of changing prices?

b) What are the limitations of CVA and how does Fully Stablished Current Value Accounting (FSCVA) correct this?

c) Calculate the real realised and the real unrealised holding gains and losses on inventory and non-current assets that would appear in a set of fully stablised current value accounts, stablised on pounds as at 31 Dec 2021.

d) Without further calculation, where would the FSCVA holding gains and losses, along with gains and losses on monetary items, be recorded in the financial statements?

e) How does FSCVA differ from Hicks' approach to defining capital and income?