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- Volume 14, Issue 2, 2006
Meditari : Research Journal of the School of Accounting Sciences - Volume 14, Issue 2, 2006
Volume 14, Issue 2, 2006
Author J.H.v.H. De WetSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 1 –16 (2006)More Less
Determining an optimal capital structure for a company is a multi-facetted problem that has challenged and fascinated academics and practitioners for a long time. This study investigates capital structures used in different countries and industries and explores the different theories on capital structure that have been put forward to date. A trade-off model, incorporating taxes and financial distress costs, is applied to determine the optimal capital structure for three companies listed on the JSE South Africa. One of the conclusions drawn from the results of this analysis is that great care needs to be taken in ensuring the reasonableness of the input data and the valuation model. Secondly, significant amounts of value can be unlocked in moving closer to the optimum level of gearing. Lastly, even when one is using a model such as the one illustrated, it may be preferable to try to operate within an acceptable interval rather than to try to attain the absolute optimum capital structure.
Source: Meditari : Research Journal of the School of Accounting Sciences 14, pp 17 –32 (2006)More Less
Research, teaching and service are usually regarded as an academic's main responsibilities. One of the most hotly debated issues in the international arena is what academics should devote their time to, since time is a limited commodity for academics and tradeoffs are necessary.
The aim of this study was to establish the perceptions of South African accounting academics with regard to how they spend their academic time. Managers can use this information in efficiency planning and individuals can use this information to compare their effort allocations to those of their colleagues. A descriptive study was conducted in which a questionnaire was used to test, inter alia, the perception of how South African accounting academics at every SAICA-accredited university use their academic time. Nine activities were tested that relate to management, teaching, research and service.
It was found that South African accounting academics spent 10% of their time on management tasks, 78% on teaching, 5% on research and 7% on service. Half (50%, median) of the respondents spent 5% of their time on management tasks, 65% on tuition and 5% on enhancing their own knowledge. It appears as if excessive time is spent on teaching, whilst inadequate time is allocated to research activities. Time spent on service activities appears to be reasonable.
An Accounting academic's qualification appears to be the best indicator against which to measure time allocation. A clear pattern emerged in a comparison between qualification and time allocation in seven of the nine activities tested. The higher the respondent's qualification, the more time is spent on management tasks, research for both non-accredited and accredited journals, acting as external examiner and community work. The inverse is true for subject-related administration and tuition.
Accounting requirements for donor-imposed restrictions and the restricted funds of not-for-profit organisationsAuthor J. RossouwSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 33 –49 (2006)More Less
Not-for-profit organisations often experience accounting problems when dealing with the restrictions that donors impose on how the organisations may spend funds. Part of the accountability and stewardship that the managements of not-for-profit organisations assume is adhering to the wishes of donors and reporting compliance with restrictions. Fund accounting is a general phenomenon among not-for-profit organisations. The use of different funds usually stems from the restrictions imposed by donors, and funds are used to account for restricted resources. Separate funds are often used to separate restricted funds from other funds in these organisations, and to present information to the users of financial statements, indicating that the organisation has indeed complied with donor-imposed restrictions. This article discusses the principles of some accounting standards already issued specifically for not-for-profit organisations in the United States of America, Canada, the United Kingdom and Australia, and presents the results of empirical research on how donor-imposed restrictions could be recorded in the financial statements of not-for-profit organisations.
Increasing convergence between the recognition of an intangible asset for financial reporting purposes and strategic management accounting and project management techniquesSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 51 –66 (2006)More Less
New management techniques such as 'just-in-time', 'lean manufacturing' and 'Six Sigma' allow management accountants to shift their focus from the management and control of production processes to the management of strategic issues. This paradigm shift resulted from shorter product life cycles, due to technological advances and a more competitive business environment. Recent revisions to the International Accounting Standards which are particularly supportive of life cycle costing and project management are likely to increase the focus on strategic management accounting further.
This article describes developments in management accounting and the recent convergence of financial reporting in terms of International Accounting Standards with strategic management accounting and project management techniques. Strategic management accounting (particularly life cycle costing) involves applying project management techniques and using the calculus of investment to manage the project as a whole. This contrasts with managing only costs and revenues during the manufacturing phase of a project. The article demonstrates that project management techniques and the calculus of investment provide the information needed to account for the value of a project in terms of IAS 38: Intangible Assets. This will ultimately give rise to both improved decision-making and more relevant financial reporting.
An empirical examination of the value relevance of intellectual capital using the Ohlson (1995) valuation modelSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 67 –81 (2006)More Less
The debate on the determinants of firm value is ongoing; and the increasing gap in the book-to-market ratio (Lev & Sougiannis 1999) has yet to be explained in the financial literature. This article contributes to the debate by examining whether intellectual capital measured using the value added intellectual coefficient (VAICTM) (Pulic 1998) contributes to the explanation of the book-to-market ratio. This study used Ohlson's 1995 valuation model and JSE Securities Exchange (SA) (JSE) data in an attempt to identify whether the book value of assets, accounting (accrual) earnings and VAICTM explain the behaviour of South African share prices. The panel data least squares model results indicate a significant relationship between share prices three months after year end, and abnormal earnings, abnormal cash dividends, book value of assets, the capital employed coefficient, and the human capital coefficient.
Applying the probability recognition criterion to recognise a deferred tax asset for unused 'secondary tax on companies' creditsSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 83 –95 (2006)More Less
According to AC 501, Accounting for 'Secondary Tax on Companies (STC)', a deferred tax asset for unused STC credits is recognised if it is probable that an entity will declare dividends against which unused STC credits can be used. This study examined the dividend declaration profile of companies recognising a deferred tax asset for unused STC credits to satisfy AC 501. In a literature review, the term 'probable' was analysed, showing that future dividend declarations are only regarded as 'probable' if their likelihood is 64% to 79%. A survey revealed that 45% of the surveyed companies with unused STC credits recognised a deferred tax asset for unused STC credits in their 2004 financial statements, and therefore believed they had satisfied the probability recognition criterion in AC 501. The survey also showed that companies that recognised a deferred tax asset have a dividend policy shareholders are familiar with, and most declare dividends annually. These two indicators can help assess the probability of future dividend declarations.
Teaching styles versus learning styles in the accounting sciences in the United Kingdom and South Africa : a comparative analysisSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 97 –112 (2006)More Less
Individuals learn in different ways, using several learning styles, but lecturers may not always present information and learning experiences that match students' learning preferences. Mismatches between learning and teaching styles can lead to disappointment with the course of study, personal discouragement and underperformance.
The learning styles of 735 undergraduate Accounting students and the teaching styles of 46 lecturers from one United Kingdom and one South African university were empirically surveyed, using the Felder-Solomon Index of Learning Styles questionnaire to consider the students' learning styles, and an adaptation of the questionnaire to analyse the lecturers' teaching styles.
The study compared learning and teaching styles between two universities in two different countries and then examined possible matches / mismatches between learning and teaching styles. Little mismatch was found (p-values smaller than 0.3). Other results are discussed and recommendations are made in relation to understanding and meeting students' learning needs and the needs of professional bodies.
The incorporation of actuarial expertise in overall audit strategies for listed South African long-term insurersAuthor S.P.J. Von WiellighSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 113 –130 (2006)More Less
As a result of the significant influence of actuaries on policy liabilities and the related earnings in the financial statements of a listed South African long-term insurer, auditors encounter a number of key issues and considerations relating to the incorporation of actuarial expertise in the audit process. Guidance for auditors to address these issues and considerations is discussed in this study. The guidance was developed as a significant element of a wider research project, the objective of which was the development of a best practice framework for the formulation of overall audit strategies for insurance contracts and the related earnings of listed South African long-term insurers.
The South African business environment in which accountants function and the role of information technology in that environmentAuthor P.L. WesselsSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 131 –149 (2006)More Less
South African business organisations operate in an environment that is changing rapidly. One of the key drivers of this change is advances in information technology (IT). Accountants are educated at various tertiary institutions to prepare them to be competent as information and knowledge workers in the South African business environment. This article aims to determine the nature and demands of the South African business and the IT environment in which accountants must function. This analysis identifies the context within which IT skills are applied by accountants by investigating the South African business and IT environment to determine how educational institutions could ensure that the students they deliver possess the critical IT skills they need to be competent in the South African business environment.
Transformation in the South African chartered accountancy profession since 2001 : a study of the progress and the obstacles black trainee accountants still encounterAuthor A. WieseSource: Meditari : Research Journal of the School of Accounting Sciences 14, pp 151 –167 (2006)More Less
The severe shortage of black chartered accountants (CAs) in South Africa highlights the need for equity in the development of future accountants. However, despite the transformation initiatives that had already been introduced by then, at the end of 2001, black CAs were still grossly underrepresented in the membership of the South African Institute of Chartered Accountants (SAICA). Furthermore, black trainee accountants still experienced cultural and social alienation, hostility and mistrust in their ability, resulting in their not reaching their full potential.
This article investigates the progress made in transforming the accountancy profession in South Africa since 2001. It surveyed the obstacles black trainee accountants still encounter, using a questionnaire that took into account issues identified from the literature reviewed. A number of recommendations are made on the basis of the findings.
The results show that black accountants are still a minority in the accountancy profession. Black trainees currently believe that they receive very good training; however, they also believe it is more difficult to be a black trainee than a white trainee. Different cultural backgrounds, a lack in social skills and race-based perceptions were identified as the key obstacles they currently encounter.