Harry Hansen calls inflation a "closed game" in which buying power gets taken from the losers' pile and is redistributed onto the winners'. It isn't a closed game, of course, since the government opens the system by coining money arbitrarily. But no matter: Hansen is interested in devising indexing and reporting methods that will portray a business's operations in accurate, real-dollar terms, rather than the apples-and-oranges disparities of accepted modes. A CPA and small-business consultant, Hansen is an iconoclast from the outset. (The first sentence reads: "Accounting has failed to report the fiscal effects of inflation, because it has misperceived the problem.") In what perhaps will become a landmark work, he defines the problem, debunks traditional fixed-dollar accounting methods (including such dogma as the last-in-first-out convention of inventory bookkeeping), and introduces sophisticated analyses and techniques that any chief financial officer would do well to study.

Basic to Hansen's approach is his principle that profit is not dollars earned, but "an increase in the ability to consume without invading capital." By understating the cost of depreciation, for example, orthodox accounting overstates profit. According to Hansen's convincing calculations, this results in a firm's paying income tax on "fallacious" earnings. Even if it follows the author's tenets, a firm may still have to pay the same tax. But at least it will know where the remaining profits went.

Hansen deinflates every aspect of P&L statements and balance sheets. The two accounting systems that he champious -- Constant Dollar and Current Cost -- are now being adapted by some large corporations. Recurrent inflation, together with Hansen's carefully concocted corrective formulae, may bring about their universal use.