Inflationary effects: Empirical evidence from 2005-2009 financial statements of publicly listed companies in the Philippines

• Main Authors: Atienza, John Rafael, Cham, Sabrina Barbara C., Gonocruz, Karla Guia P., Laydia, Janelle Anne I.
• Format: text
• Language: English
• Published: Animo Repository 2011
• Subjects: Financial statements > Standards; Accounting > Effect of inflation on; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/11422
• Institution: De La Salle University

The adjustments for inflation are mandated by the Philippine Accounting Standards 29, or the Financial Reporting in Hyperinflationary Economies, only when hyperinflation occurs in the economy. This leads to the restatement of the values in the financial statements to reflect its nominal amount as of the statement of financial position date. This is done to make the information in the financial statements more meaningful. This study is focused on the impact of inflation when applied to the 2005 to 2009 annual Financial Statements of publicly-listed companies in the Philippines. Financial ratios were used in this study to evaluate the impact of inflation in the financial statements of companies. The Fisher Effect was used in incorporating inflation to these financial ratios. A comparison between the original values and the inflation adjusted values was done through the use of T-Test for the overall analysis wherein all sample companies from different industries were tested and analysed. The results for the overall analysis showed that there is a significant difference between historical and inflated amounts of some financial ratios, especially those with long term components. A per industry comparative analysis was also done through the Wilcoxon matched pairs signed rank test. The results of the per industry analysis showed that all ratios had a significant difference for the 5-year period with the exemption of financial and mining and oil industry. This study aims to give a better understanding on the impact of inflation in the financial statements and be of guidance to the different users of the financial statements. This is done through the examination of the reliability, accuracy and effectiveness of the Financial Statements in showing a company's level of performance. The results indicate that there is a need to evaluate the conditions that necessitate adjustments for inflation even under normal economic conditions.