Browsing by Author "Modack, Goolam"

Now showing 1 - 4 of 4
  • Thumbnail Image
    Item
    Open Access
    A study on the possible impact of constructive lease capitalisation on selected listed South African companies' financial statements, in light of IFRS 16 leases
    (2019) Cape, Jared; Modack, Goolam
    This study analyses the possible effects of constructive lease capitalisation on all companies in four sectors of the Johannesburg Stock Exchange (JSE) namely Industrial Transportation, Food and Drug Retailers, General Retailers and Travel and Leisure, in light of the impending adoption of IFRS 16.1 The capitalisation is performed using a model developed by Imhoff Jr., Lipe, & David, (1997) & Imhoff Jr., Lipe, & Wright, (1991) as well as further refinements in Dillon, (2014) & Fulbier, Silva, & Pferdehirt, (2006). The analysis looks at the effects of constructive capitalisation on key leverage and profitability ratios, and line items in the financial statements. The study also assesses the impact on disclosed loan covenants and whether constructive capitalisation will result in the breach of any covenants. The results show that the adoption of IFRS 16 has an impact on key ratios and line items specifically leverage ratios and earnings before interest, tax, depreciation and amortisation (EBITDA) margin. The sector most impacted is the Food and Drug Retailers. No loan covenants were breached as a result of constructive capitalisation, however the impact on the covenants was both positive and negative.
  • No Thumbnail Available
    Item
    Open Access
    IFRS 17 and its effects on financial performance and the statement of financial position: a comparative analysis of the South African insurance companies including banks
    (2025) Myendeki, Sive; Modack, Goolam
    In the South African market, insurance plays an important role by enabling businesses to manage risks they could not manage individually, while also reinvesting some of the premiums in South Africa to drive economic growth and create jobs. For individuals, insurance provides important protection for valuable assets. The introduction of International Financial Reporting Standards (IFRS) 17 by the International Accounting Standards Board (IASB), effective from 1 January 2023, resulted in a change in the measurement requirements of insurance contracts compared to IFRS 4. This study investigated the impact of the transition from IFRS 4 to IFRS 17 on the financial performance and the statement of financial position of insurance service providers in South Africa. This study, grounded in the Rational Choice Theory, the Liquidity Preference Theory and the Pecking Order Theory, analysed twelve insurance service providers licensed by the FSCA and operating in South Africa. The results of the study revealed that IFRS 17 did not have a statistically significant impact on the financial performance of these insurance service providers. However, the statement of financial position experienced a statistically significant decrease in reported total assets and total liabilities, while the changes to the reported equity and insurance liabilities were not found to be statistically significant. The decrease in the reported total assets and liabilities was noted to be due to the change in the measurement requirements for insurance contracts accounting such as the treatment of acquisition costs. Under IFRS 4, insurers were allowed to capitalise and defer acquisition costs as deferred acquisition cost assets on the balance sheet. The DAC asset was then expensed to the income statement over the life of the insurance contract. However, under IFRS 17, this DAC is included as part of the insurance service liability resulting in a decrease in reported total assets and total liabilities. Furthermore, the reported total assets and liabilities are impacted by the requirement to discount these balances using the IFRS 17 risk-adjusted approaches as well as the changes to the underlying assumption used in the measurement calculations. This analysis and results may assist regulators, investors and other users of financial statements to better understand the impact IFRS 17 has had on the financial performance of insurance service providers in South Africa.
  • No Thumbnail Available
    Item
    Open Access
    Implications of IFRS 16: leases - evidence from JSE-listed telecommunication companies
    (2025) Raolane, Rirhandzu; Modack, Goolam
    This study investigates the implications of the new leasing standard, IFRS 16 Leases, on companies in the Telecommunications sector of the Johannesburg Stock Exchange. The International Accounting Standards Board's upcoming Post-Implementation Review of IFRS 16 is considered in this study (International Accounting Standards Board, 2023). IFRS 16, which is effective from 1 January 2019 (IFRS Foundation, 2016a), introduces requirements for lessees to present and disclose assets and liabilities that arise from leasing arrangements as part of their statement of financial position at initial recognition (IFRS Foundation, 2016a). The analysis of the impact is performed through a financial statement analysis, as well as financial ratio analysis, which is a different from the constructive capitalisation model developed by Imhoff et al. (1991, 1997). The findings of this study suggest that the implementation of IFRS 16 Leases led to a rise in reported assets and liabilities in the financial statements, which had an impact on key financial ratios for companies that rely on leased assets as part of their operations. The study's findings also show that as more leasing information is available, the implementation of IFRS 16 has led to financial statements that provide more transparent and comparable financial information.
  • Thumbnail Image
    Item
    Open Access
    The Firm-Specific Determinants of Capital Structure in Public Sector and Private Sector Banks in India
    (2019) Garach, Jatin Bijay; Rajaratnam, Kanshukan; Modack, Goolam
    The banking industry in India has undergone many phases in its history; evolving from a regulated, decentralised system in the early 1800’s, to a regulated, centralised system during British rule, to a nationalised system following India’s independence, and finally a combination of a nationalised and private system adopting global standards as it currently stands. This study has two main aims. Firstly, it will assess the relationship between the firm-specific determinants of capital structure, based on the prevailing literature, and the capital structure of public and private sector banks in India. Secondly, it will determine whether there is a difference in the firm-specific factors that contribute to the determination of the capital structure of public sector banks and private sector banks. This study adopts quantitative methods, similar to previous studies on the relationship between capital structure and its firm-specific determinants. The dependent variable, being total leverage, is regressed against multiple independent variables, being profitability, growth, firm size and credit risk (hereinafter referred to as “risk” unless otherwise indicated) in a multivariate linear regression model. This study adds to the current literature by applying the same firm-specific independent variables to the case of private and public sector banks and then to evaluate and compare the similarities and differences between the regression outputs. The results show that for private sector banks, all independent variables are statistically significant in explaining total leverage, where all the independent variables conform to the current literature on capital structure – profitability (-), firm size (-), growth (+) and credit risk (-). Conversely, for public sector banks, all independent variables were considered to be statistically significant, except for credit risk – profitability (-), firm size (+) and growth (+). These results imply that credit risk is not an important determination in a nationalised banks’ capital structure; thus, providing evidence for the moral hazard theory of public sector banks.