Original Research

IAS15 inflation adjustments and EVA: empirical evidence from a highly variable inflation regime

Pierre Erasmus
South African Journal of Economic and Management Sciences | Vol 12, No 2 | a273 | DOI: https://doi.org/10.4102/sajems.v12i2.273 | © 2011 Pierre Erasmus | This work is licensed under CC Attribution 4.0
Submitted: 18 August 2011 | Published: 22 August 2011

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Abstract

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’ EVAs

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