Definition of Indexation

Indexation

The adjustment of benefits to compensate for the effects of inflation.

Cumulative Translation Adjustment (CTA) account

An entry in a translated balance sheet in which gains
and/or losses from translation have been accumulated over a period of years. The CTA account is required
under the FASB No. 52 rule.

Incremental costs and benefits

Costs and benefits that would occur if a particular course of action were
taken compared to those that would occur if that course of action were not taken.

Inflation

The rate at which the general level of prices for goods and services is rising.

Inflation risk

Also called purchasing-power risk, the risk that changes in the real return the investor will
realize after adjusting for inflation will be negative.

Inflation uncertainty

The fact that future inflation rates are not known. It is a possible contributing factor to
the makeup of the term structure of interest rates.

Inflation-escalator clause

A clause in a contract providing for increases or decreases in inflation based on
fluctuations in the cost of living, production costs, and so forth.

benefits-provided ranking

a listing of service departments in an order that begins with the one providing the most service
to all other corporate areas; the ranking ends with the
service department providing service primarily to revenueproducing
areas

judgmental method (of risk adjustment)

an informal method of adjusting for risk that allows the decision maker
to use logic and reason to decide whether a project provides
an acceptable rate of return

inflation

Rate at which prices as a whole are increasing.

Cost-Push Inflation

inflation whose initial cause is cost increases rather than excess demand. See also demand-pull inflation.

Demand-Pull Inflation

inflation whose initial cause is excess demand rather than cost increases. See also cost-push inflation.

Disinflation

A reduction in the rate of inflation.

Hyperinflation

Extremely high inflation.

Inflation

A sustained increase in the general price level. The inflation rate is the percentage rate of change in the price level.

Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.

Seasonal Adjustment

adjustment to correct measures for changes that happen for seasonal reasons.

Workers' Compensation Benefits

Employer-paid insurance that provides their employees with wage compensation if they are injured on the job.

Cumulative-Effect Adjustment

The cumulative, after-tax, prior-year effect of a change in accounting
principle. It is reported as a single line item on the income statement in the year of the
change in accounting principle. The cumulative-effect-type adjustment is the most common accounting
treatment afforded changes in accounting principle.

Inventory adjustment

A transaction used to adjust the book balance of an inventory
record to the amount actually on hand.

Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.

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