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South African Journal of Economic and Management Sciences

On-line version ISSN 2222-3436
Print version ISSN 1015-8812

S. Afr. j. econ. manag. sci. vol.12 n.2 Pretoria Jul. 2009




IAS15 inflation adjustments and EVA: Empirical evidence from a highly variable inflation



Pierre Erasmus

Department of Business Management, University of Stellenbosch




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.

Keywords: financial performance under inflation, IAS15 inflation adjustments, nominal EVA values, real EVA values, South African industrial firms' EVAs

JEL E31; 32



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