Does the IFRS 16 affect the key ratios of listed companies? Evidence from Poland

Abstract

The paper aims to assess the International Financial Reporting Standard (IFRS) 16 “Leases” impact on the lessees’ financial situation. The study was conducted on the financial data for 2018–2019 of 494 companies listed on the Warsaw Stock Exchange using the difference-in-differences (DID) method. The hand-collected data on lease usage retrieved from the financial statements and the data for financial ratios obtained from the Orbis database were used. The research sample includes 308 preparers under IFRS and 186 entities applying accounting policies under the Polish Accounting Act. It is shown that the IFRS 16 implementation resulted in a significant increase in the debt-to-equity and debt-to-total assets ratios of lessees and a decrease in the profitability. We identified significant leverage increase in the trade and services sectors. The results confirm the conclusions of previous studies based on estimates, whose authors expected a significant differential effect of IFRS 16 implementation between industries.

Explanatory Factors of the Compliance With Ifrs 16 (Leases) Disclosure Requirements: Evidence From the Portuguese Stock Market

“…Regarding the regression model, the results obtained are presented in Table 3 below. By analyzing the model results, as Jaworska et al (2022) and Sbaih et al (2023), we observe that the entry into force of the new IFRS 16 standard had no significant impact on the profitability ratios. Our result is in line with Fuad et al (2022), who note that implementation of IFRS 16 does not bring about higher financial performance.…”

“…However, literature does not present consistent results in relation to profitability (Zamora-Ramírez & Morales-Dias, 2018). According to Jaworska et al (2022) and Sbaih et al (2023), the application of IFRS 16 standard had no significant impact on the profitability ratios. Nevertheless, Correia (2015) obtained a negative and non-significant relationship between profitability and the disclosure degree.…”

“…Some studies show that operating leases result in off-balance sheet financing, earning enhancement and improvement in ratios such as debt to equity (leverage) ((Zamora-Ramírez & Morales-Dias, 2018). Jaworska et al (2022) found that the implementation of IFRS 16 increased the debt ratio. However, several studies (Ali, 2021, Tran et al, 2019, Santos et al, 2014, Correia (2015 and Tsalavoutas, 2011) found that leverage does not significantly influence the degree of compliance with international standards disclosure requirements.…”