Question

example of violation of the stable monetary unit assumption , how would it affect the quality of finantial statment information

Answer 1

Violation of the stable monetary unit assumption may be inflation . Balance sheets and profit and loss acconts and ledgers for that matter can be compared over periods if the inflation is with in manageable levels. When there is a hyperinflation then accounting in local currency may violate stable monetary unit.USD is considered to be a stable monetary unit. However local currencies of countries facing high inflation may not be stable over years.

Examples of violation of the stable monetary unit assumption are

Employee skill level

Employee working conditions

Product durability

The quality of customer support or field service

The efficiency of administrative processes

All of the preceding factors are indirectly reflected in the financial results of a business, because they impact on either revenues,expenses,assets or liabilities.

Many factors can lead to long term changes in financial results or financial position of a business.

It can lead to the issuance of financial statements that may not be adequately represent the future upside of a business.