ACCOUNTING IN AN INFLATIONARY ECONOMY: A STUDY OF THE BRAZILIAN SYSTEM OF MONETARY CORRECTION

The study comprises a descriptive and theoretical analysis of the Brazilian system of inflation accounting, known as monetary correction. Part One describes and explains the history and evolution of the system of inflation accounting in Brazil, showing it to be an integral part of a comprehensive system to coexist with inflation. Part One provides basic information for people interested in the Brazilian experience with inflation accounting. The primary methodologies employed in Part One are documentary research and personal interviews.;Through the analysis it is discovered that a number of firm-specific and economy-wide factors adversely affect the ability of the Brazilian system to measure real profit. The general conclusion regarding the ability of the Brazilian system to achieve its economic objectives is that, given the reality of differential relative prices, the current system is not capable of achieving either of its objectives.;Part Two consists of an evaluation of the ability of the system of inflation accounting to achieve its economic objectives: to provide an equitable basis for the assessment of taxes and dividends, and to provide information useful to the capital market. The effectiveness with which the system is achieving its objectives is evaluated by analyzing its ability to measure the criterion of evaluation, real profit. Analysis is conducted through the use of case examples and computer simulation.