In conditions of price changes, historical cost accounting faces three problems, namely:

1. The Problem of Valuation

The problem of valuation is related to the basis on which to measure the value of the
post at a time. The problem of measuring units in price changes is related to the scale of
measurement. The value of individual or specific assets will change when compared to
certain other assets even though the purchasing power of money does not change. This
change is caused by the use of different technologies or the ability of new products that
are higher.
People's perception or taste of the benefits or value of certain goods can also cause
changes in value which ultimately affect the price of the goods. Such price changes are
called specific price changes.
2. The Problem of Measurement Unit
The purchasing power of money can change so that the monetary unit as a measure
of value is no longer homogeneous when related to time. This change in the value of the
measuring unit occurs because of changes in the general price level in a country's
economy. That is, if the value or benefit of an item does not change, the number of
monetary units that can be used to obtain the same item will differ from time to time
because the purchasing power of money changes.
In general, the purchasing power of money decreases because of
inflation. Accounting faces this problem because the nominal cost of the measured
rupiah unit is no longer homogeneous for a number of items, so the sum of vertical or
horizontal boarding costs is no longer meaningful.
3. The Problem of Capital Maintenance
The problem of holding capital in price changes relates to the type of capital that must
be maintained, namely financial or physical. Profit is the increase in capital in a period
that can be distributed or enjoyed after the initial capital is maintained. To determine
profits by maintaining capital, three important things in measuring capital must be
considered, namely the basis of valuation, the scale of measurement, and the type of
capital, especially in the event of changes in price or value.
If the effect of price changes as above is not considered, in a situation of attractive
price changes, the calculation of profits on the basis of historical costs tends to be more
presented. This is due to changes due to price increases or to detention attached to
profit figures. The number of profits presented can result in a distribution of profits that
exceeds the amount that can leave profits to maintain capital.

In addition, the historical cost method shows that the financial statements of events that
are late have passed. Accounting is also arranged based on the principle of monetary units,
this means that accounting only provides quantitative and monetary data. Accounting only
provides data that is material. While inflation is an event that will come, which is influenced
by previous events. Inflation that occurs in a country will have an impact on the financial
statements presented because the information is irrelevant and not in accordance with the
actual market situation.

To overcome the problems:

To overcome the problems, the model for dealing with this problem is the accounting
of present values whose measurement of value depends on the basis of the valuation
adopted, namely the present cost or the current output value. The difference lies in the
presentation and interpretation of the amount of rupiah to maintain capital in the profit and
loss statement.