410 Planning and Forecasting
statement that called for the disclosure of supplemental information on price-
level adjusted earnings.^52 A subsequent statement, issued in 1986, held that
these price-level adjusted disclosures, while still recommended, would no
longer be required.^53 There was opposition by the business community to the
requirements of SFAS No. 33, and efforts to demonstrate that the new disclo-
sures were either used or useful were not successful. While principally of his-
torical interest in this period of very modest inf lation, some of the disclosures
required by SFAS No. 33 are discussed and presented.^54
SFAS No. 33, Price-Level Adjusted Disclosures
Beginning in 1979, certain large U.S. firms were required to provide supplemen-
tal information on the effect of inf lation on financial performance. The disclo-
sures included new information on earnings computed on both a constant-dollar
and a current-cost basis. The constant-dollarmethod retains historical cost as
the basis of financial measurement. However, it does make selected restate-
ments so that all financial statement balances are presented in units of the same
purchasing power, that is, expressed in the same price index. The current-cost
method replaces historical cost balances with current (replacement) costs as the
basis for financial statement measurement. Exhibit 12.33 provides an example
of disclosures of price-level adjusted results under the requirements of SFAS
No. 33.^55
A very different message about profitability is conveyed by the adjusted
information in Exhibit 12.33. A significant level of historical-cost profits is al-
most eliminated when current-cost adjustments are applied, and profit turns
into loss under the constant-dollar alternative. The purchasing power of the re-
sources invested in producing the 1980 results, as represented by the constant-
dollar amount of expenses, exceeded Tiger ’s constant-dollar revenues. Closer
EXHIBIT 12.33 Income statements adjusted for changing prices: Tiger
International Inc., December 31, 1980 (in thousands).
Historical Current Constant
Financials Cost Dollar
Revenues $1,562,270 $1,562,270 $1,562,270
Cost and Expenses
Cost of operations 1,104,672 1,108,673 1,109,324
Selling, general, and administrative 139,462 139,462 139,462
Depreciation and amortization 118,332 151,924 171,096
Interest, net 140,929 140,929 140,929
Income tax provision 16,500 16,500 16,500
1,519,895 1,557,488 1,577,311
Net income (loss) $ 42,375 $ 4,782 $ (15,041)
SOURCE: Tiger International Inc., annual report, December 1980, 39.