The gearing adjustment in inflation accounting: The financing sequence assumption
| Autor: | M. A. Van Hoepen, I. J. Lambrechts, F. J. Mostert |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 1989 |
| Předmět: | |
| Zdroj: | South African Journal of Business Management, Vol 20, Iss 3, Pp 163-167 (1989) |
| Druh dokumentu: | article |
| ISSN: | 2078-5585 2078-5976 |
| DOI: | 10.4102/sajbm.v20i3.956 |
| Popis: | The application of a gearing adjustment in inflation accounting has always resulted in the problem of determining a financing sequence. A decision has to be taken whether certain categories of assets are financed with equity and/or loan capital. Financial theory of the last few decades quite convincingly revealed that there are no logical grounds for relating certain assets to certain liabilities and/or equity. This proportional financing assumption is discussed and illustrated in the article for the so-called Van der Schroeff-system of income demermination in order to point out the sensitivity and financial consequences of this assumption for financial decision making. The assumption about the financing sequence does have a definite influence on the gearing adjustment. Further influences are on the income statement and the message given to shareholders and the investment public; the composition of the asset structure and consequently the risk composition of the assets; the composition of the financing structure and consequently the financial risk as portrayed by the balance sheet; and the marginal financing ratios needed to maintain the original gearing ratio. |
| Databáze: | Directory of Open Access Journals |
| Externí odkaz: |
|