Sectoral analysis of the impact of IFRS 16 and COVID-19 on the indicators of Brazilian lessees

Abstract

The objective of this article was to analyze the impact of International Financial Reporting Standard 16 (IFRS 16) and the coronavirus disease 2019 (COVID-19) pandemic on the indicators of Brazilian lessee companies, segregated by economic sector. The effects of IFRS 16 after its entry into force and of COVID-19 simultaneously with the concession of the International Accounting Standards Board (IASB) on the indicators of lessee companies, segregated by Brazilian economic sectors, were not yet known. The study contributes to the literature by providing evidence on the consequences of the accounting standard setters’ decisions, as well as the COVID-19 pandemic, on the indicators of different economic sectors. The study helps both preparers and regulators to understand the impact of the accounting standardization and COVID-19 on the indicators of lessee companies according to economic activity. For investors, it shows the importance of anticipating the impact of the standards on their decision making. A comparative analysis of the indicators before and after the adoption of the new standard and the pandemic was carried out, as well as a statistical relevance analysis for the indicators of public companies, by economic sector and using the difference in differences method and multiple linear regression with panel data, for the period from 2010 to 2020. The study showed that the impact of IFRS 16 on the indicators was differentiated by sector, with healthcare, oil, gas, and biofuels, and cyclical consumption being the most affected. The standard was not relevant to the value of most sectors, with the exception of healthcare and non-cyclical consumption, showing that investors were positively surprised by the adoption of IFRS 16 by these sectors. The effect of COVID-19, combined with the IASB’s concession to lessees, was positive for profitability and earnings before interest, taxes, depreciation, and amortization (EBITDA) in the healthcare sector, but did not reverse the deterioration in leverage and profitability of the industrial goods sector and the lessees as a whole and the profitability of the cyclical consumption sector, highlighting the partial effectiveness of the measure.