Page 206-207, Book 2 Schweser (I can write out the examples for you guys if it would help): Based on this example, I understand that nonmonetary assets are remeasured at (current index price/average price) and common stock at (current index price/average) but why is retained earnings–which is also equity–not remeasured? If it’s not remeasured, why is it not included in adjustments to purchasing power gain/loss?
Because retained earnings has to be calculated from net income. Net income includes the purchasing power gain or loss that will flow to retained earnings, right?
oh ok…maybe. Am I right about nonmonetary assets being remeasured at (current index price/average price) and common stock at (current index price/average)? Because that’s what they do in the example. For the 2007 balance sheet, they give the Dec 31, 2006 index of 100, the Dec 31 2007 index of 150, and the Average of 2007 index of 125. Those are the only three indicies they give in this simple example. But what if there are other index values for 2007 given, like a June 30, 2007 index? Do I ALWAYS use the (Dec 31 2007 index/Average 2007 index) for equities?