Effects of Inflation Accounting on Organizational Decisions and Financial Performance in South African Retail Stores

12 Pages Posted: 28 Jan 2021

See all articles by Odunayo Olarewaju

Odunayo Olarewaju

Durban University of Technology, South Africa

Mzwandile Atkins Mbambo

Durban University of Technology, South Africa

Brian Ngiba

Durban University of Technology, South Africa

Date Written: November 18, 2020

Abstract

The inflation accounting technique allows a business to show or have a sensible picture of their gains due to present cost coordinates with present revenues. Thus, the effects of inflation accounting on organizational decisions and financial performance of Kwa-Zulu Natal retail stores were evaluated in this study. The study used a quantitative research method. A total of 161 completed questionnaires were received from respondents in the selected 20 listed stores in Kwa-Zulu Natal. Thus, the Exploratory Factor Analysis and linear regressions were employed in this study. The empirical study reveals how inflation accounting significantly impacts organizational decisions and financial performance of the retail business with such coefficients (F (1, 159) = 49.269, p < .0005; F (1, 159) = 28.959, p < .0005). The findings of this study highlighted positive relationships between the variables that were used. Thus, the study recommends that retail stores always consider inflation changes and apply inflation accounting techniques to make adjustments to produce more accurate results in their financial statements. Heated discussions now surround the basis of financial performance measurement via historical cost accounting. This influences their decision making and financial performance positively.

Keywords: Inflation, Historical Cost, Accounting, Financial Statements, Exploratory Factor Analysis, Johannesburg Stock Exchange, South Africa

JEL Classification: G32, L25, L16

Suggested Citation

Olarewaju, Odunayo and Mbambo, Mzwandile Atkins and Ngiba, Brian, Effects of Inflation Accounting on Organizational Decisions and Financial Performance in South African Retail Stores (November 18, 2020). Odunayo Olarewaju, Mzwandile Mbambo and Brian Ngiba (2020). Effects of inflation accounting on organizational decisions and financial performance in South African retail stores. Problems and Perspectives in Management, 18(4), 85-95. doi:10.21511/ppm.18(4).2020.08, Available at SSRN: https://ssrn.com/abstract=3732595

Odunayo Olarewaju

Durban University of Technology, South Africa

India

Mzwandile Atkins Mbambo (Contact Author)

Durban University of Technology, South Africa ( email )

Department of Management Accounting, Ritson campus
DUT
Durban, KZN
South Africa

Brian Ngiba

Durban University of Technology, South Africa

India

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