The impact of IFRS 16 on lessees' financial information: A single-industry study

Abstract

This single-industry study responds to the IFRS Foundation's call to determine the effects of implementing IFRS 16 by analyzing the isolated post-implementation effect of IFRS 16 on lessee financial statements. Using real implementation data, the findings confirm the expected results of prior studies using estimated data, in that the implementation of IFRS 16 is the primary driver of statistically significant changes in assets, liabilities, EBIT, EBITDA, and financial expenses, resulting in major changes in the structure and liquidity ratios. Regarding profitability ratios, this study adds to the literature by demonstrating a statistically significant difference in ROA. Furthermore, while prior studies suggest that the interest coverage ratio would decrease, the use of real implementation data shows no statistically significant finding on this ratio; this indicates that the increase in EBITDA and interest expenses may cancel each other out, resulting in no impact on the coverage ratio. The results support the main criticism of IAS 17—that operating leases were improperly accounted for and consequently altered the picture of financial statements and ratios, which is a key source of information in valuing companies. This single-industry study, one of the more extensive IFRS Foundation 2016 studies, is the first to use real IFRS 16 adoption data, providing substantial results regarding the impact of this standard on the financial statements of publicly traded companies. These results encourage further research using similar approaches with broader sample sizes.