VIII. Check your grammar.

Translate the following sentences paying attention to translation of impersonal sentences.

1. The official currency of the United Kingdom is the pound sterling.

2. There are banknotes of the following denominations: Ł1, Ł5,. Ł10,. Ł20, Ł50 and Ł100.

3. On the face of English banknotes one can read the denomination given both in figures and in words.

4. One can see the portrait of Florence Nightingale, the founder of the nursing profession, on the back of the ten pound note.

5. On the twenty pound banknote one can find William Shakespeare’s portrait.

IX. Check your grammar.

Put the questions to the sentences of exercise VII, beginning with the following words:

1. What …

2. Are …

3. Where …

4. Which …

5. Can …

Unit XV Problems of Measurement

Wordlist

anticipate	передбачати, очікувати	предвидеть, ожидать
average	середній	средний
claim	стверджувати, заявляти	утверждать, заявлять
confuse	змішувати, плутати	смешивать, путать
contend	стверджувати, заявляти	утверждать, заявлять
conventional	звичайний, нормальний	обычный, нормальный
holding gain	прибуток від збільшення вартості активів	доход от увеличения стоимости активов
holding loss	збиток від зменшення вартості активів	убыток от уменьшения стоимости активов
implication	те, що мається на увазі	смысл, значение
increment	приріст, прибуток	прирост, увеличение
inventory	товарно-матеріальні цінності	товарно-материальные ценности
monetary measures	грошовий вимірник	денежный показатель
net assets	нетто-активи	нетто-активы
net monetary assets	чисті грошові активи	чистые денежные активы
nominal currency	номінальна валюта	номинальная валюта
replacement cost	поновлена вартість	обновленная стоимость
replacement cost of assets	витрати на заміну активів	затраты на замену активов
restate assets	переводити активи із однієї валюти в іншу	переводить активы из одной валюты в другую
superhighway	шосе	шоссе
wholesale value	оптова ціна	оптовая цена

I. Read the text and determine the problems of measurement.

Accounting income does not include all of the company's holding gains or losses (increases or decreases in the market values of its assets). For example, construction of a superhighway may increase the value of a company's land, but neither the income statement nor the balance sheet will report this holding gain. Similarly, introduction of a successful new product increases the company's anticipated future cash flows, and this increase makes the company more valuable. Those additional future sales show up neither in the conventional income statement nor in the balance sheet.

Accounting reports have also been criticized on the grounds that they confuse monetary measures with the underlying realities when the prices of many goods and services have been changing rapidly. For example, if the wholesale price of an item has risen from $100 to $ 150 between the time the company bought it and the time it is sold, many accountants claim that $150 is the better measure of the amount of resources consumed by the sale. They also contend that the $50 increase in the item's wholesale value before it is sold is a special kind of holding gain that should not be classified as ordinary income.

When inventory purchase prices are rising, LIFO inventory costing keeps many gains from the holding of inventories out of net income. If purchases equal the quantity sold, the entire cost of goods sold will be measured at the higher current prices; the ending inventory will be measured at the lower prices shown for the beginning-of-year inventory. The difference between the LIFO inventory cost and the replacement cost at the end of the year is an unrealized (and unreported) holding gain.

The amount of inventory holding gain that is included in net income is usually called the "inventory profit." The implication is that this is a component of net income that is less "real" than other components because it results from the holding of inventories rather than from trading with customers.

When most of the changes in the prices of the company's resources are in the same direction, the purchasing power of money is said to change. Conventional accounting statements are stated in nominal currency units (dollars, francs, lire, etc.), not in units of constant purchasing power. Changes in purchasing power - that is, changes in the average level of prices of goods and services - have two effects. First, net monetary assets (essentially cash and receivables minus liabilities calling for fixed monetary payments) lose purchasing power as the general price level rises. These losses, do not appear in conventional accounting statements. Second, holding gains measured in nominal currency units may merely result from changes in the general price level. If so, they represent no increase in the company's purchasing power.

II. Re-read the text to find the answers to these questions.

1. Does accounting income include all of the company’s holding gains or losses?

2. What makes the company more valuable?

3. Why are accounting reports criticized?

4. What is a special kind of holding gain? Explain using the example from the text.

5. When will the entire cost of goods be measured at the higher current prices?

6. What is an unrealized holding gain?