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.

Prior research considers limited elements of the summarised financial information disclosed for equity accounted associates under IAS 28. Moreover, prior research does not consider the collective or incremental value-relevance of these disclosures. This study investigates the incremental value-relevance of all the required elements of disclosed summarised financial information for listed associates and controls for disclosed fair values. Findings suggest that individual elements of disclosed summarised financial information are sometimes incrementally valuerelevant, but that the elements have the greatest incremental value-relevance as a group.These findings imply that investors value a firm's investments in listed associates at a self-developed intrinsic value, rather than using the market value (fair value) of that associate directly. By extension, underlying accounting information of listed associates remains value-relevant, even when alternative market-based valuations are available.

Summary at a glance: This paper examines the value-relevance of equity accounted carrying amounts and disclosed fair values of investments in listed associates. It finds that investors determine an intrinsic value for investment in listed associates and that the alternative measurement bases are incrementally value-relevant as a result.