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Accounting for inflation is one of the more controversial topics in financial reporting. This paper traces the evolution of the system of inflation accounting used in one of the most highly inflationary economies in the world: Brazil. The history of inflation accounting in Brazil (known as monetary correction) is divided into three time periods: pre-1964, 1964 to 1976, and 1976 to the present. The events pertinent to the system of monetary correction in each of these periods are first discussed and then evaluated. It is shown that the system of monetary correction has been subject to massive political pressures since its inception, but gradual improvements have taken place over the years.



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