The effect of the IFRS 16: constructive capitalization of operating leases in the Turkish retailing sector

Sari, Emre Selçuk; Altıntaş, Taylan

doi:10.17261/pressacademia.2016116657

Cited by 15 publications

(17 citation statements)

References 8 publications

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“…The most important problem is the operating leases above one year that will be capitalized, which means that the accounting treatment "off-balance-sheet" is effectively eliminated. After the application of this standard, companies with significant operating leases are likely to experience an increase in assets and liabilities, as well as a decrease in equity, which can significantly affect their financial ratios [3]. Financial ratios are one type of measuring instrument that companies use to analyze financial reports.…”

Section: Introductionmentioning

confidence: 99%

The Impact of IFRS 16 (PSAK 73) Implementation on Key Financial Ratios: An Evidence from Indonesia

Susanti¹,

Ardana²,

Sufiyati³

et al. 2021

Advances in Economics, Business and Management Research

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IFRS 16 was issued to overcome the criticism of IAS 17, especially regarding the fact that many lease transactions on lessee are not included in the statement of financial position (off-balance-sheet), making it difficult for users to get an accurate view of the assets and liabilities of the leasing company, as well as being difficult to estimate the amount that is off-balance-sheet. After the adoption of this standard, companies with significant operating leases are likely to experience an increase in assets, an increase in liabilities, and a decrease in equity, which can significantly affect their financial ratios. This research objective was to determine the impact of the application of IFRS 16 (PSAK 73) on the financial statements and key financial ratios of an airline company in Indonesia. This research focused on the airline operator company, PT Garuda Indonesia Tbk, which utilizes a lot of lease financing in the procurement of their aircraft fleets. This research has a very appropriate momentum considering that 2020 is the beginning of the implementation of IFRS 16 (PSAK 73) for all public companies in Indonesia. This research used a case-study approach. The results show that the level of profitability (ROA), solvency, and efficiency in the use of assets experience a decline, but the liquidity ratio and profitability (ROE) increase.

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Section: Introductionmentioning

confidence: 99%

The Impact of IFRS 16 (PSAK 73) Implementation on Key Financial Ratios: An Evidence from Indonesia

Susanti¹,

Ardana²,

Sufiyati³

et al. 2021

Advances in Economics, Business and Management Research

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show abstract

“…In addition, the implementation of both options result in an increase in the liability. Sari, Altintas & Tas (2016) examined the effect of the IFRS 16: constructive capitalization of operating leases in the Turkish retailing sector. This study uses a constructive capitalization method for these companies.…”

Section: Literature Reviewmentioning

confidence: 99%

Comparison analysis of financial performance telecommunication service which has and has not applied PSAK 73

Kloko

Bayunitri

2020

IJFAM

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This research aimed to find out a comparative analysis of the financial performance of companies that has and has not applied the PSAK 73 or IFRS 16 of Lease. Research Methodology: The research used was quantitative descriptive method. The Financial performance analysis performed used a liability, solvency, activity, and profitability ratio. Results: From the research, it is known that by applying the PSAK 73 on lease in companies has an impact on the financial performance especially on the liability ratio and profitability ratio. Limitations: The narrowing of the study scope was only to industrial telecommunications due to the inability to collect all data from each type of business. In addition, the application of PSAK 73 in Indonesia was unforced to be implemented in companies in 2019 but in 2020. However, this regulation was possible to apply earlier in 2019 in only corporations meeting requirements. This was aimed at limiting the generalization of study. Contribution: The result of this study is expected to be useful with regard to the application of PSAK 73 or IFRS 16 of Lease on financial performance in companies.

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“…Notes: to measure the effect, the key financial ratios which include debt and profitability ratio will be used as comparative variables. The unrecorded assets and liabilities will be calculated using constructive lease capitalization [6] [7]. The financial statement under the implementation of the new leases standard is forecasted with rational assumptions based on the proposed strategy.…”

Section: Business Issuementioning

confidence: 99%

Untitled

2019

JSSH

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Garuda Indonesia is the flag carrier of Indonesia which has received plenty awards and acknowledgements in the last several years. Yet, in the last several months, albeit its accomplishments, there were quite plenty bad news spreading, including the poor financial performance which led to loss of shareholders' trust. Besides, Garuda Indonesia is also facing the implementation of the new IFRS 16 which many said would definitely change the air transport industry. The new IFRS 16, which will be adapted as PSAK 73, will eliminate the term "operating lease" so that it has to be reported as "financial lease", making airlines who use operating lease strategy will be financially affected, especially their financial statement and ratios.To understand the effect, using quantitative approach by looking at historical data, the financial statement and ratio are projected. The constructive lease capitalization method is used to see the difference between statement and ratio with and without capitalization. Two determinant factors which are leased aircraft growth rate and cost of capital as discount rate are analyzed to understand the step Garuda Indonesia shall implement to reduce the negative impact. The result shows that by doing nothing, the financial statement and ratio will be severely impacted, and by reducing those determinant factors, the effects can be reduced to improve its position. In the end, based on the analysis, a set of strategies are proposed. Therefore, the senior management can understand what to do to mitigate the effects.Even though as claimed by IASB that the new standard would not affect the company's economic value, analysts expected that it will still affect the shareholders' perception as they usually only look at the figures without requiring to understand the cause. These could lead to a worse condition for Garuda Indonesia. Therefore, the senior management has to treat this matter seriously and arrange a set of strategies to mitigate the negative impacts.Limitations in this study include the method of capitalization, the ratios being analyzed which only cover debt and profitability ratio, and statements being analyzed do not include cash flow statement and change in shareholder's equity.

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The effect of the IFRS 16: constructive capitalization of operating leases in the Turkish retailing sector

Cited by 15 publications

References 8 publications

The Impact of IFRS 16 (PSAK 73) Implementation on Key Financial Ratios: An Evidence from Indonesia

The Impact of IFRS 16 (PSAK 73) Implementation on Key Financial Ratios: An Evidence from Indonesia

Comparison analysis of financial performance telecommunication service which has and has not applied PSAK 73

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