| inflation adjustment split |
An inflation adjustment in which the system splits the amount between two separate accounts, one that represents the general inflation rate, and one that represents the price level change for that G/L account.
Example
A company located in Venezuela keeps its books in bolivares (VEB). It adjusts the balance of a G/L account for platinum, VEB 2,000,000, using a specific index, with a net change in the inflation rate of 20%, which works out at VEB 400,000. The general inflation rate, however, is running at 15% (VEB 300,000).
This means that of the VEB 400,000 increase in the value of the company's stocks, VEB 300,000 of this can be accounted for by the general increase in prices. It therefore posts VEB 300,000 to the G/L account for inflation and VEB 100,000 to the G/L account for unrealized gains (losses) on precious metals.