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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
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    References listed on IDEAS

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    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.
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    Cited by:

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    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

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