INVESTIGATING THE IMPACT OF IFRS 16 ADOPTION IN SERBIAN HOTEL INDUSTRY
Keywords:
financial reporting, IFRS, IAS, leases, lessee.
Abstract
The effects of the implementation of IFRS 16 in the hotel industry, as one of the industries with the highest amounts of leased assets, is the primary focus of this paper. The International Accounting Standards Board addopted International Financial Reporting Standard 16 - Leases in January 2016, replacing International Accounting Standard 17 – Leases, for reporting periods starting on or after 1st January 2019. The updated regulations introduce different accounting models for lessees and lessors. The influence of IFRS 16 on a reporting entity is contingent on the quantity of existing operating lease agreements and differs across various industries. The research sample includes financial reports of 64 hotels per reporting period (2020-21), totaling 128 observation units. Data analysis included the application of statistical tests such as Kolmogorov-Smirnov test, Shapiro-Wilk test, and Wilcoxon signed-rank test. The research results indicate that aside other events, adoption of IFRS 16 had an impact on the financial performance of observed hotels and their key financial statements items.
References
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Ashton, R. (1985). Accounting for finance leases: A field test. Accounting and Business Research, 15(59), 233-238. http://doi.org/10.1080/00014788.1985.9729269
Barone, E., Birt, J., & Moya, S. (2014). Lease accounting: A review of recent literature. Accounting in Europe, 11(1), 35-54. http://doi.org/10.1080/17449480.2014.903630
Beattie, V., Edwards, K., & Goodacre, A. (1998). The impact of constructive operating lease capitalization on key accounting rations. Accounting and Business Research, 28(4), 233-254. http://doi.org/10.1080/00014788.1998.9728913
Bowman, R. (1980). The debt equivalence of leases: An empirical investigation. Accounting Review, 55(2), 237-253.
Chung, H. (2022). The effects of new accounting standards on firm value: The K-IFRS 1116 lease. International Journal of Financial Studies, 10(3), 68. http://doi.org/10.3390/ijfs10030068.
Dayag, A., Latosa, J., & Dimatulac, O. (2023). PFRS 16 Compliance: How operating lease capitalization affects financial ratios of selected philippine public companies. International Journal of Finance & Banking studies, 12(1), 74-84. http://doi.org/10.20525/ijfbs.v12i1.2634.
Durocher, S. (2008). Canadian evidence on the constructive capitalisation of operating leases. Accounting Perspectives, 7(3), 227-256. http://doi.org/10.1506/ap.7.3.2.
EY. (2023, September 10). The IASB’s new leases standard - The impact for lessees 2016. https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/accounting/ey-the-iasbs-new-leases-standard.pdf
Fitò, M., Moya, S., & Orgaz, N. (2013). Considering the effects of operating lease capitalisation on key financial ratios. Spanish Journal of Finance and Accounting, 159(1), 341-368. https://doi.org/10.1080/02102412.2013.10779750
Gligoric, M., Mizdrakovic, V., Mitrasinovic, I., & Boskovic, V. (2019). Audit timeliness and market capitalization: Evidence from an emerging market. Industrija, 47(4), 21-45. https://doi.org/10.5937/industrija47-24095
Gligorijevic, Z., & Kostadinovic, I. (2023). Tourism of the Republic of Serbia: Characteristics and strategic goals of development. International Review, 1-2, 51-58. https://doi.org/10.5937/intrev2302059G
Goodacre, A. (2003). Operating lease finance in the UK retail sector. The International Review of Retail, Distribution and Consumer Research, 13(1), 99-125. https://doi.org/10.1080/0959396032000065373
Grossman, A., & Grossman, S. (2010). Capitalizing lease payments. The CPA Journal, 80(5), 6-11. https://leasingnews.org/PDF/cpa_journal510.pdf
Honny, D., Gamayuni, R., & Putri, W. (2022). The effect of financial performance on firm value after the implementation of PSAK 73 concerning capitalization of leases. Asian Journal of Economics and Business Management, 1(3), 257–266. https://doi.org/10.53402/ajebm.v1i3.239
IFRS. (2023, October 15). From IFRS 16 Leases. https://www.ifrs.org/issued-standards/list-of-standards/ifrs-16-leases/
Imhoff, E., Lipe, R., & Wright, D. (1991). Operating leases: Impact of constructive capitalization. Accounting Horizons, 5(1), 51-63.
Jesswein, K. (2009). Analyzing creditworthiness from financial statements in the presence of operating leases. Academy of Accounting and Financial Studies Journal, 13(1), 75-90.
Joubert, M., Garvie, L., & Parle, G. (2017). Implications of the new accounting standard for leases AASB 16 (IFRS 16) with the inclusion of operating leases in the balance sheet. Journal of New Business Ideas and Trends, 15(2), 1-11.
Jovancai Stakic, A., Mizdrakovic, V., & Kljajic, M. (2023). Credit Risk Analysis of Serbian Luxury Hotels: Impact of COVID-19. Menadzment u hotelijerstvu i turizmu, 11(2), 75-87. https://doi.org/10.5937/menhottur2302075J
Karwowski, M. (2018). Business model and lease accounting according to IFRS 16. International Journal of Economics, Business and Management Research, 2(1), 128-139.
Kljajic, M., Mizdrakovic , V., Mizdrakovic, M., & Hadrovic Zekic, B. (2023). Balancing hospitality and reporting: analyzing the impact of ifrs 16 in the hotel industry. FINIZ 2023 - Sustainable development as a measure of modern business success (pp. 22-29). Belgrade: Singidunum University. https://doi.org/10.15308/finiz-2023-22-29
Lau, C. (2023). The economic consequences of IFRS 16 adoption: The role of gearing restriction in debt covenants. Journal of Applied Accounting Research, 24(3), 464-482. https://doi.org/10.1108/JAAR-08-2021-0208
Lemos, K., Monteiro, S., & Oliveira, V. (2023). Explanatory factors of the compliance with IFRS 16 (Leases) disclosure requirements: Evidence from the Portuguese stock market. The Journal of Globalization, Compeririveness, and Governability, 17(2), 101-115.
Liviu-Alexandru , T. (2018). The Advantages that IFRS 16 Brings to the Economic Environment. “Ovidius” University Annals, Economic Sciences Series, 18(1), 510-513.
Maali, B. (2018). The effect of applying the new IFRS 16 “Leases” on financial statements: An empirical analysis on the airline industry in the Middle East. Organisational Studies and Innovation Review, 4(1), 1-9.
Magli, F., Nobolo, A., & Ogliari, M. (2018). The effects on financial leverage and performance: The IFRS 16. Canadian Center of Science and Education, 11(8), 76-89. https://dx.doi.org/10.5539/ibr.v11n8p76
Masic, S. (2013). The Performance of the Serbian Hotel Industry. Singidunum Journal, 10(2), 24-31. https://doi.org/10.5937/ejae10-4481
Mizdrakovic, V., Stanic, N., Mitic, V., Obradovic , A., Kljajic, M., Obradovic , M., & Stanisic , N. (2020). Empirical data on financial and audit reports of Serbian business entities. FINIZ 2020 - People in the center of process automation (pp. 193-198). Belgrade: Singidunum University. https://doi.org/10.15308/finiz-2020-193-198
Moralez-Diaz, J., & Zamora-Ramirez, C. (2018a). Effects of IFRS 16 on key financial ratios of Spanish companies. Studies of Applied Economics, 36(2), 385-406. https://doi.org/10.25115/eea.v36i2.2536
Nugroho, F., & Gantyowati, E. (2023). Effect of the new standard of leasing (PSAK 73 Adopts IFRS 16) on firm value during the COVID-19 pandemic. International Journal of Professional Business Review, 8(6), e02455-e02455. https://doi.org/10.26668/businessreview/2023.v8i6.2455
Nuryani, N., Hengb, T. T., & Juliesta, N. (2015). Capitalization of operating lease and its impact on firm’s financial ratios. Social and Behavioral sciences, 211(1), 268-276. https://doi.org/10.1016/j.sbspro.2015.11.034
Official Gazette of RS No. 89/2020. (2023, September 5). Regulation on the chart of accounts and the content of accounts in the chart of accounts for other legal entities. https://www.paragraf.rs/propisi/pravilnik-kontnom-okviru-sadrzini-racuna-kontnom-okviru-druga-pravna-lica.html
Ozturk, M., & Sercemeli, M. (2016). Impact of new standard “IFRS 16 Leases” on statement of financial position and key ratios: A case study on an airline company in Turkey. Business and Economics Research Journal, 7(4), 143-157. https://doi.org/10.20409/berj.2016422344
Raoli, E. (2021). Transition to the new lease accounting model (IFRS 16) and companies’ performance evidence from Italian listed companies. Academy of Accounting and Financial Studies Journal, 25(3), 1-18.
Rihter, J. D., & Conic, N. (2022). Značajne izmene u računovodstvenom evidentiranju zakupa u skladu sa MSFI 16. Računovodstvena znanja kao činilac ekonomskog i društvenog napretka (pp. 86-98). Kragujevac: Univerzitet u Kragujevcu, Ekonomski fakultet.
Ro, B. (1978). The disclosure of Capitalized lease information & the stock prices. Journal of Accounting Research, 16(2), 315-340. https://doi.org/10.2307/2490570
Sacarin, M. (2017). IFRS 16 “Leases” – consequences on the financial statements and financial indicators. Audit Financiar, 15(1), 114-122. https://doi.org/10.20869/AUDITF/2017/145/114
Schlup, R. (2004). Hotel management agreements: Balancing the interests of owners and operators. Journal of Retail & Leisure Property, 3(1), 331-342.
Singh, A. (2010). Proposed lease accounting changes: Implications for the restaurant and retail industries. Journal of Hospitality & Tourism Research, 36(3), 335-365. https://doi.org/10.1177/1096348010388659
Stancheva-Todorova, E., & Velinova-Sokolova, N. (2019). IFRS 16 leases and its impact on company’s financial reporting, financial ratios and performance metrics. Economic Alternatives, 1(1), 44-62. https://www.unwe.bg/uploads/Alternatives/4_EA_1_2019_en.pdf
Tai, B. (2013). Constructive capitalization of operating leases in the Hong-Kong fast-food industry. Accounting and Financial Reporting, 3(1), 128-142.
Veverkova, A. (2019). IFRS 16 and its impact on aviation industry. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 67(5), 1369-1377.
Wong, K., & Joshi, M. (2015). The impact of lease capitalization on financial statements and key ratios: Evidence from Australia. Australian Accounting, Business and Finance Journal, 9(3), 27-44. http://dx.doi.org/10.14453/aabfj.v9i3.3
Yu, J. (2019). Investigation of IFRS 16 effect on the airlines. Journal of Finance and Accounting, 7(5), 132-135.
Zamora-Ramírez, C., & Morales-Díaz, J. (2018). Effects of IFRS 16 on key financial ratios of Spanish companies. Studies of Applied Economics, 36(2), 385-405. https://doi.org/10.25115/eea.v36i2.2536
Agyei-Boapeah, H., Machokoto, M., Amankwah-Amoah, J., Tunyi, A., & Fosu, S. (2020). IFRS adoption and firm value: African evidence. Accounting Forum, 44(3), 238-261. http://doi.org/10.1080/01559982.2020.1766755
Anicic, J., Ceha, M., Anicic, D., Ceha, N., & Nestorovic, O. (2023). High quality financial reporting in the function of company growth in Serbia. The European Journal of Applied Economics, 20(2), 111-130. https://doi.org/10.5937/ejae20-42729
Ashton, R. (1985). Accounting for finance leases: A field test. Accounting and Business Research, 15(59), 233-238. http://doi.org/10.1080/00014788.1985.9729269
Barone, E., Birt, J., & Moya, S. (2014). Lease accounting: A review of recent literature. Accounting in Europe, 11(1), 35-54. http://doi.org/10.1080/17449480.2014.903630
Beattie, V., Edwards, K., & Goodacre, A. (1998). The impact of constructive operating lease capitalization on key accounting rations. Accounting and Business Research, 28(4), 233-254. http://doi.org/10.1080/00014788.1998.9728913
Bowman, R. (1980). The debt equivalence of leases: An empirical investigation. Accounting Review, 55(2), 237-253.
Chung, H. (2022). The effects of new accounting standards on firm value: The K-IFRS 1116 lease. International Journal of Financial Studies, 10(3), 68. http://doi.org/10.3390/ijfs10030068.
Dayag, A., Latosa, J., & Dimatulac, O. (2023). PFRS 16 Compliance: How operating lease capitalization affects financial ratios of selected philippine public companies. International Journal of Finance & Banking studies, 12(1), 74-84. http://doi.org/10.20525/ijfbs.v12i1.2634.
Durocher, S. (2008). Canadian evidence on the constructive capitalisation of operating leases. Accounting Perspectives, 7(3), 227-256. http://doi.org/10.1506/ap.7.3.2.
EY. (2023, September 10). The IASB’s new leases standard - The impact for lessees 2016. https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/accounting/ey-the-iasbs-new-leases-standard.pdf
Fitò, M., Moya, S., & Orgaz, N. (2013). Considering the effects of operating lease capitalisation on key financial ratios. Spanish Journal of Finance and Accounting, 159(1), 341-368. https://doi.org/10.1080/02102412.2013.10779750
Gligoric, M., Mizdrakovic, V., Mitrasinovic, I., & Boskovic, V. (2019). Audit timeliness and market capitalization: Evidence from an emerging market. Industrija, 47(4), 21-45. https://doi.org/10.5937/industrija47-24095
Gligorijevic, Z., & Kostadinovic, I. (2023). Tourism of the Republic of Serbia: Characteristics and strategic goals of development. International Review, 1-2, 51-58. https://doi.org/10.5937/intrev2302059G
Goodacre, A. (2003). Operating lease finance in the UK retail sector. The International Review of Retail, Distribution and Consumer Research, 13(1), 99-125. https://doi.org/10.1080/0959396032000065373
Grossman, A., & Grossman, S. (2010). Capitalizing lease payments. The CPA Journal, 80(5), 6-11. https://leasingnews.org/PDF/cpa_journal510.pdf
Honny, D., Gamayuni, R., & Putri, W. (2022). The effect of financial performance on firm value after the implementation of PSAK 73 concerning capitalization of leases. Asian Journal of Economics and Business Management, 1(3), 257–266. https://doi.org/10.53402/ajebm.v1i3.239
IFRS. (2023, October 15). From IFRS 16 Leases. https://www.ifrs.org/issued-standards/list-of-standards/ifrs-16-leases/
Imhoff, E., Lipe, R., & Wright, D. (1991). Operating leases: Impact of constructive capitalization. Accounting Horizons, 5(1), 51-63.
Jesswein, K. (2009). Analyzing creditworthiness from financial statements in the presence of operating leases. Academy of Accounting and Financial Studies Journal, 13(1), 75-90.
Joubert, M., Garvie, L., & Parle, G. (2017). Implications of the new accounting standard for leases AASB 16 (IFRS 16) with the inclusion of operating leases in the balance sheet. Journal of New Business Ideas and Trends, 15(2), 1-11.
Jovancai Stakic, A., Mizdrakovic, V., & Kljajic, M. (2023). Credit Risk Analysis of Serbian Luxury Hotels: Impact of COVID-19. Menadzment u hotelijerstvu i turizmu, 11(2), 75-87. https://doi.org/10.5937/menhottur2302075J
Karwowski, M. (2018). Business model and lease accounting according to IFRS 16. International Journal of Economics, Business and Management Research, 2(1), 128-139.
Kljajic, M., Mizdrakovic , V., Mizdrakovic, M., & Hadrovic Zekic, B. (2023). Balancing hospitality and reporting: analyzing the impact of ifrs 16 in the hotel industry. FINIZ 2023 - Sustainable development as a measure of modern business success (pp. 22-29). Belgrade: Singidunum University. https://doi.org/10.15308/finiz-2023-22-29
Lau, C. (2023). The economic consequences of IFRS 16 adoption: The role of gearing restriction in debt covenants. Journal of Applied Accounting Research, 24(3), 464-482. https://doi.org/10.1108/JAAR-08-2021-0208
Lemos, K., Monteiro, S., & Oliveira, V. (2023). Explanatory factors of the compliance with IFRS 16 (Leases) disclosure requirements: Evidence from the Portuguese stock market. The Journal of Globalization, Compeririveness, and Governability, 17(2), 101-115.
Liviu-Alexandru , T. (2018). The Advantages that IFRS 16 Brings to the Economic Environment. “Ovidius” University Annals, Economic Sciences Series, 18(1), 510-513.
Maali, B. (2018). The effect of applying the new IFRS 16 “Leases” on financial statements: An empirical analysis on the airline industry in the Middle East. Organisational Studies and Innovation Review, 4(1), 1-9.
Magli, F., Nobolo, A., & Ogliari, M. (2018). The effects on financial leverage and performance: The IFRS 16. Canadian Center of Science and Education, 11(8), 76-89. https://dx.doi.org/10.5539/ibr.v11n8p76
Masic, S. (2013). The Performance of the Serbian Hotel Industry. Singidunum Journal, 10(2), 24-31. https://doi.org/10.5937/ejae10-4481
Mizdrakovic, V., Stanic, N., Mitic, V., Obradovic , A., Kljajic, M., Obradovic , M., & Stanisic , N. (2020). Empirical data on financial and audit reports of Serbian business entities. FINIZ 2020 - People in the center of process automation (pp. 193-198). Belgrade: Singidunum University. https://doi.org/10.15308/finiz-2020-193-198
Moralez-Diaz, J., & Zamora-Ramirez, C. (2018a). Effects of IFRS 16 on key financial ratios of Spanish companies. Studies of Applied Economics, 36(2), 385-406. https://doi.org/10.25115/eea.v36i2.2536
Nugroho, F., & Gantyowati, E. (2023). Effect of the new standard of leasing (PSAK 73 Adopts IFRS 16) on firm value during the COVID-19 pandemic. International Journal of Professional Business Review, 8(6), e02455-e02455. https://doi.org/10.26668/businessreview/2023.v8i6.2455
Nuryani, N., Hengb, T. T., & Juliesta, N. (2015). Capitalization of operating lease and its impact on firm’s financial ratios. Social and Behavioral sciences, 211(1), 268-276. https://doi.org/10.1016/j.sbspro.2015.11.034
Official Gazette of RS No. 89/2020. (2023, September 5). Regulation on the chart of accounts and the content of accounts in the chart of accounts for other legal entities. https://www.paragraf.rs/propisi/pravilnik-kontnom-okviru-sadrzini-racuna-kontnom-okviru-druga-pravna-lica.html
Ozturk, M., & Sercemeli, M. (2016). Impact of new standard “IFRS 16 Leases” on statement of financial position and key ratios: A case study on an airline company in Turkey. Business and Economics Research Journal, 7(4), 143-157. https://doi.org/10.20409/berj.2016422344
Raoli, E. (2021). Transition to the new lease accounting model (IFRS 16) and companies’ performance evidence from Italian listed companies. Academy of Accounting and Financial Studies Journal, 25(3), 1-18.
Rihter, J. D., & Conic, N. (2022). Značajne izmene u računovodstvenom evidentiranju zakupa u skladu sa MSFI 16. Računovodstvena znanja kao činilac ekonomskog i društvenog napretka (pp. 86-98). Kragujevac: Univerzitet u Kragujevcu, Ekonomski fakultet.
Ro, B. (1978). The disclosure of Capitalized lease information & the stock prices. Journal of Accounting Research, 16(2), 315-340. https://doi.org/10.2307/2490570
Sacarin, M. (2017). IFRS 16 “Leases” – consequences on the financial statements and financial indicators. Audit Financiar, 15(1), 114-122. https://doi.org/10.20869/AUDITF/2017/145/114
Schlup, R. (2004). Hotel management agreements: Balancing the interests of owners and operators. Journal of Retail & Leisure Property, 3(1), 331-342.
Singh, A. (2010). Proposed lease accounting changes: Implications for the restaurant and retail industries. Journal of Hospitality & Tourism Research, 36(3), 335-365. https://doi.org/10.1177/1096348010388659
Stancheva-Todorova, E., & Velinova-Sokolova, N. (2019). IFRS 16 leases and its impact on company’s financial reporting, financial ratios and performance metrics. Economic Alternatives, 1(1), 44-62. https://www.unwe.bg/uploads/Alternatives/4_EA_1_2019_en.pdf
Tai, B. (2013). Constructive capitalization of operating leases in the Hong-Kong fast-food industry. Accounting and Financial Reporting, 3(1), 128-142.
Veverkova, A. (2019). IFRS 16 and its impact on aviation industry. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 67(5), 1369-1377.
Wong, K., & Joshi, M. (2015). The impact of lease capitalization on financial statements and key ratios: Evidence from Australia. Australian Accounting, Business and Finance Journal, 9(3), 27-44. http://dx.doi.org/10.14453/aabfj.v9i3.3
Yu, J. (2019). Investigation of IFRS 16 effect on the airlines. Journal of Finance and Accounting, 7(5), 132-135.
Zamora-Ramírez, C., & Morales-Díaz, J. (2018). Effects of IFRS 16 on key financial ratios of Spanish companies. Studies of Applied Economics, 36(2), 385-405. https://doi.org/10.25115/eea.v36i2.2536
Published
2024/04/19
Section
Original Scientific Paper
