IDEAS home Printed from https://ideas.repec.org/a/cys/ecocyb/v50y2017i1p37-57.html
   My bibliography  Save this article

Measuring the Company’s Real Performance by Physical Capital Maintenance

Author

Listed:
  • IULIA JIANU

    (The Bucharest University of Economic Studies)

  • IONEL JIANU

    (The Bucharest University of Economic Studies)

  • CARMEN TURLEA

    (The Bucharest University of Economic Studies)

Abstract

The measurement of profit depends on the concepts of capital maintenance used by the company in preparing its financial statements. The IASB Framework offers the option of choosing between two concepts of capital maintenance - financial capital and physical capital. This study highlights the adverse consequences of financial capital maintenance and supports for the recognition of profits by maintaining the physical capital. In this study we proposed a theoretical model to calculate the real profit by maintaining the physical capital. The model is applied for all Romanian production companies listed with available data by the restatement of information disclosed in the financial statements. The results demonstrate that the model based on physical capital maintenance captures the company’s real performance. This model could be an alternative to the model based on financial capital maintenance which operates nowadays on the financial markets.

Suggested Citation

  • Iulia Jianu & Ionel Jianu & Carmen Turlea, 2017. "Measuring the Company’s Real Performance by Physical Capital Maintenance," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(1), pages 37-57.
  • Handle: RePEc:cys:ecocyb:v:50:y:2017:i:1:p:37-57
    as

    Download full text from publisher

    File URL: ftp://www.eadr.ro/RePEc/cys/ecocyb_pdf/ecocyb1_2017p37-57.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
    2. Collins, Daniel W. & Maydew, Edward L. & Weiss, Ira S., 1997. "Changes in the value-relevance of earnings and book values over the past forty years," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 39-67, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khanh Ngoc Nguyen, 2019. "Revenue Diversification, Risk and Bank Performance of Vietnamese Commercial Banks," JRFM, MDPI, vol. 12(3), pages 1-21, August.
    2. Miklós Pakurár & Hossam Haddad & János Nagy & József Popp & Judit Oláh, 2019. "The Service Quality Dimensions that Affect Customer Satisfaction in the Jordanian Banking Sector," Sustainability, MDPI, vol. 11(4), pages 1-24, February.
    3. Ionel Jianu & Iulia Jianu, 2018. "The Share Price and Investment: Current Footprints for Future Oil and Gas Industry Performance," Energies, MDPI, vol. 11(2), pages 1-15, February.
    4. Dongheun Lee & Sejoong Lee & Na-Eun Cho, 2019. "Voluntary Disclosure and Market Valuation of Sustainability Reports in Korea: The Case of Chaebols," Sustainability, MDPI, vol. 11(13), pages 1-20, June.
    5. Xusen Cheng & Danya Huang & Jin Chen & Xiangsong Meng & Chengyao Li, 2019. "An Investigation on Factors Affecting Stock Valuation Using Text Mining for Automated Trading," Sustainability, MDPI, vol. 11(7), pages 1-17, April.
    6. Qianwei Ying & Tahir Yousaf & Qurat ul Ain & Yasmeen Akhtar & Muhammad Shahid Rasheed, 2019. "Stock Investment and Excess Returns: A Critical Review in the Light of the Efficient Market Hypothesis," JRFM, MDPI, vol. 12(2), pages 1-22, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tae Choi & Jinchul Jung, 2008. "Ethical Commitment, Financial Performance, and Valuation: An Empirical Investigation of Korean Companies," Journal of Business Ethics, Springer, vol. 81(2), pages 447-463, August.
    2. Palea, Vera, 2014. "Are IFRS value-relevant for separate financial statements? Evidence from the Italian stock market," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 23(1), pages 1-17.
    3. Elbakry, Ashraf E. & Nwachukwu, Jacinta C. & Abdou, Hussein A. & Elshandidy, Tamer, 2017. "Comparative evidence on the value relevance of IFRS-based accounting information in Germany and the UK," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 28(C), pages 10-30.
    4. Filip, Andrei & Raffournier, Bernard, 2010. "The value relevance of earnings in a transition economy: The case of Romania," The International Journal of Accounting, Elsevier, vol. 45(1), pages 77-103, March.
    5. repec:dau:papers:123456789/2165 is not listed on IDEAS
    6. Maigoshi, Zaharaddeen Salisu & Latif, Rohaida Abdul & Kamardin, Hasnah, 2018. "Change in value-relevance of disclosed RPT across accounting regimes: Evidence from Malaysia," Research in International Business and Finance, Elsevier, vol. 44(C), pages 422-433.
    7. Keryn Chalmers & Greg Clinch & Jayne M Godfrey, 2011. "Changes in value relevance of accounting information upon IFRS adoption: Evidence from Australia," Australian Journal of Management, Australian School of Business, vol. 36(2), pages 151-173, August.
    8. Kerstin Lopatta & Thomas Kaspereit, 2014. "The World Capital Markets’ Perception of Sustainability and the Impact of the Financial Crisis," Journal of Business Ethics, Springer, vol. 122(3), pages 475-500, July.
    9. Chen, Shimin & Wang, Yuetang, 2004. "Evidence from China on the value relevance of operating income vs. below-the-line items," The International Journal of Accounting, Elsevier, vol. 39(4), pages 339-364.
    10. Koji Ota, 2010. "The Value Relevance of Management Forecasts and Their Impact on Analysts' Forecasts: Empirical Evidence From Japan," Abacus, Accounting Foundation, University of Sydney, vol. 46(1), pages 28-59, March.
    11. Vera Palea, 2012. "Are IFRS Value-Relevant for Separate Financial Statements? Evidence from the Italian Stock Market," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201211, University of Turin.
    12. Ruch, George W. & Taylor, Gary, 2015. "Accounting conservatism: A review of the literature," Journal of Accounting Literature, Elsevier, vol. 34(C), pages 17-38.
    13. Schaberl, Philipp D., 2016. "Beyond accounting and back: An empirical examination of the relative relevance of earnings and “other” information," Advances in accounting, Elsevier, vol. 35(C), pages 98-113.
    14. Hyun Mi Ji, 2018. "The Usefulness of Accounting Information Derived by Applying the Percentage of Completion Method to Enhance Sustainable Business Practices: Evidence from South Korea," Sustainability, MDPI, vol. 11(1), pages 1-12, December.
    15. Devalle, Alain & Magarini, Riccardo & Onali, Enrico, 2009. "Assessing the Value Relevance of Accounting Data After the Introduction of IFRS in Europe," MPRA Paper 56174, University Library of Munich, Germany, revised 08 Oct 2009.
    16. Carol A. Marquardt & Christine I. Wiedman, 2004. "The Effect of Earnings Management on the Value Relevance of Accounting Information," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(3‐4), pages 297-332, April.
    17. Palea Vera, 2013. "Capital Market Effects of the IFRS Adoption for Separate Financial Statements: Evidence from the Italian Stock Market," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201309, University of Turin.
    18. Ali Alnodel, 2018. "The Impact of IFRS Adoption on the Value Relevance of Accounting Information: Evidence from the Insurance Sector," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(4), pages 138-138, March.
    19. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    20. Gjerde, Øystein & Knivsflå, Kjell Henry & Sættem, Frode, 2005. "The Value Relevance of Financial Reporting on the Oslo Stock Exchange over the Period 1964-2003," Discussion Papers 2005/23, Norwegian School of Economics, Department of Business and Management Science.
    21. Baboukardos, Diogenis & Rimmel, Gunnar, 2014. "Goodwill under IFRS: Relevance and disclosures in an unfavorable environment," Accounting forum, Elsevier, vol. 38(1), pages 1-17.

    More about this item

    Keywords

    physical capital; capital maintenance; profit; Romania; accounting; performance; IFRS; conceptual framework.;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cys:ecocyb:v:50:y:2017:i:1:p:37-57. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Corina Saman (email available below). General contact details of provider: https://edirc.repec.org/data/feasero.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.