Open AccessIAS15 inflation adjustments and EVA: empirical evidence from a highly variable inflation regime
Author(s) -
Pierre D. Erasmus
Publication year - 2011
Publication title -
suid-afrikaanse tydskrif vir ekonomiese en bestuurswetenskappe/south african journal of economic and management sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.277
H-Index - 17
eISSN - 2222-3436
pISSN - 1015-8812
DOI - 10.4102/sajems.v12i2.273
Subject(s) - economics , inflation (cosmology) , depreciation (economics) , variable (mathematics) , monetary economics , real interest rate , econometrics , value (mathematics) , order (exchange) , macroeconomics , interest rate , finance , microeconomics , statistics , mathematics , theoretical physics , capital formation , profit (economics) , mathematical analysis , physics , financial capital
Inflation can have a pronounced effect on the financial performance of a firm. This study makes inflation adjustments to a firm’s cost of sales, depreciation, level of gearing and assets in line with International Accounting Standard 15 (IAS15) in order to calculate an inflation-adjusted version of the economic value added (EVA) measure. The study was conducted using data from South African industrial firms during a period characterised by highly variable inflation levels (1991-2005). The results indicate that during this period there were significant differences between the nominal and real values of the firms’ EVA