The Institutional Research Group in the Office of the Provost maintains information on cost deflators for use in financial analysis. The most commonly used deflator is the Consumer Price Index for Urban Dwellers, (CPI-U) The CPI is provided by the Bureau of Labor Statistics (BLS). Information about the CPI can be found at http://www.bls.gov/cpi/.
Institutional research provides six different series using the CPI-U that can be used in Financial Analysis.
CPI-U Fiscal Year
- Weighted Average with 1982-1983 as the base year (1982-1983 = 100)
- Weighted Average with FY2012 as the base year (2012 = 100)
- June CPI-U
CPI-U Calendar Year
- Weighted Average with 1982-1983 as the base year (1982-1983 = 100)
- Weighted Average with 2011 as the base year (2011 = 100)
(Weighted averages are only available at the end of a twelve month period)- December CPI-U
Weighted averages are used when you are measuring change that involves expenditures during a period of time that is greater than a month, such as the fiscal year. For example, if you were comparing the total expenditures in research for fiscal year 2003 with the total expenditures for research for fiscal year 2012 you would you use the weighted average. If you were comparing expenditures during the month of June 2012 with expenditures in the month of June 2003 you would use the June CPI-U.
You would use the June CPI -U if you were comparing the cost of a machine that you bought in June 2012 and what it would might have cost in June 2003. The June or July CPI-U would also be appropriate when comparing the value of the endowment.
When using the weighted average the choice of a base year depends upon how you wish to portray the change. When you chose the current year as the base, you will be reducing the dollar amount of financial data in previous years. When you use an earlier year as the base, you are increasing the dollar amount of current financial figures. For example, $100 in FY2012 equals $80.00 in 2003. $100 in 2003 equals $125.00 in FY2012.
The term Constant Dollars (C$) is used to indicate that financial numbers have been weighted to eliminate the effects of inflation.
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