imported>Doug Williamson |
imported>Doug Williamson |
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| 1. ''Inflation - comparative measures - money terms.'' | | 1. ''Index numbers''. |
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| A real terms measure is one which has been restated to exclude the effects of inflation.
| | In the context of index numbers, rebasing can refer to either: |
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| When inflation is positive, real terms measures of future amounts are correspondingly smaller, the effects of inflationary growth having been stripped out.
| | - changing the weights in an index, such as an inflation index, |
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| | - changing the reference period of an index number series. |
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| <span style="color:#4B0082">'''Example 1'''</span>
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| If £100 is invested for a year
| | The weights and the reference period may be changed at the same time. |
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| at a nominal rate of 10% and
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| inflation is 2%,
| | 2. ''Tax.'' |
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| we can say that the nominal rate is 10%,
| | In relation to tax, rebasing means re-stating the base value of an asset for tax calculation purposes. |
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| but the real rate is only:
| | The re-statement would usually be upward, thereby reducing any potentially taxable gain calculated on any surplus over the base value. |
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| = (1.10 / 1.02) - 1
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| = 7.84%
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| all rates being expressed as effective annual rates.
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| This is because goods which cost £100 today will cost £102 in a year's time.
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| Therefore only a 7.84% return has been made if we take into account the new prices of goods.
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| Notice how the inflation rate and the real terms rate compound together to produce the nominal (money terms) rate.
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| <span style="color:#4B0082">'''Example 2'''</span>
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| (1.02 x 1.0784) - 1
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| = 10%.
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| When either the inflation rate or the real rate is low, the result is approximately the same as simply adding or subtracting rates.
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| <span style="color:#4B0082">'''Example 3'''</span>
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| When the nominal rate is 6%
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| and the inflation rate is 4%,
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| the real rate is approximately:
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| = 6% - 4%
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| = +2%.
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| (Calculated more strictly, it would be (1.06 / 1.04) - 1 = +1.92%, all rates being effective annual rates.)
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| <span style="color:#4B0082">'''Example 4'''</span>
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| When the nominal rate is 3%
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| and the inflation rate is 4%,
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| the real rate is approximately:
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| = 3% - 4%
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| = -1%.
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| (Calculated more strictly, it would be (1.03 / 1.04) - 1 = -0.96%.)
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| 2. ''Theory - practical application - greenwash.''
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| Real terms significance and application generally refers to important actions and the actual net effects of those important actions.
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| Contrasted with statements or activities that are not backed up with such actions.
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| For example, greenwashing activities are ones that have minimal positive environmental impact in real terms.
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| == See also == | | == See also == |
| * [[Greenwash]] | | * [[Assets]] |
| * [[Inflation]] | | * [[Base value]] |
| * [[Money terms]] | | * [[Capital gain]] |
| * [[Nominal]] | | * [[Capital Gains Tax]] |
| * [[Real]] | | * [[Corporation Tax]] |
| * [[Real economy]] | | * [[Index]] |
| * [[Real estate]]
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| * [[Real income]]
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| * [[Real option]]
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| * [[Real interest rate]]
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| * [[Real rate]]
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| ===Other resources===
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| [[Media:2013_10_Oct_-_The_real_deal.pdf| The real deal, The Treasurer student article]]
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| [[Category:Accounting,_tax_and_regulation]] | | [[Category:Accounting,_tax_and_regulation]] |
| [[Category:The_business_context]]
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| [[Category:Compliance_and_audit]]
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| [[Category:Ethics]]
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| [[Category:Identify_and_assess_risks]]
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| [[Category:Manage_risks]]
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| [[Category:Risk_frameworks]]
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| [[Category:Risk_reporting]]
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| [[Category:Financial_products_and_markets]]
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1. Index numbers.
In the context of index numbers, rebasing can refer to either:
- changing the weights in an index, such as an inflation index,
- changing the reference period of an index number series.
The weights and the reference period may be changed at the same time.
2. Tax.
In relation to tax, rebasing means re-stating the base value of an asset for tax calculation purposes.
The re-statement would usually be upward, thereby reducing any potentially taxable gain calculated on any surplus over the base value.
See also
