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Cumulative effect of IFRS 15 and IFRS 16 on maritime company financial statements: a hypothetical case

Author

Listed:
  • Nicholas Belesis

    (University of Piraeus)

  • John Sorros

    (University of Piraeus)

  • Alkiviadis Karagiorgos

    (University of Piraeus)

  • Paraskevas Kousounadis

    (Halkidon Shipping Corporation)

Abstract

Companies preparing their financial statements under International Financial Reporting Standards (IFRS) have to adopt the newly issued IFRS 15—Revenue from Contracts with Customers and IFRS 16—Leases. This paper examines what significant effects these new IFRS may have on the financial statements of maritime companies. The study explores the financial position and performance of a hypothetical maritime company by examining the preparation of two major financial statements, the balance sheet and the income statement, before and after the adoption of IFRS 15 and IFRS 16. These statements and the financial information that they provide are compared. According to the findings of this study, the effect of IFRS 15 is expected to be quite limited and mainly concerns the charging of some direct voyage expenses, which are considered contract costs, between accounting periods. In contrast, the effects of IFRS 16 are expected to be much more intense. The most significant impacts include a strong increase in leverage ratios, an increase in gross profits, and an enormous increase in balance sheet amounts. Understanding these effects is of great importance for shareholders, firms’ valuators, and investors, as it can provide evidence of the influence of these new accounting standards on the financial position of a maritime company. Additionally, the presented findings are essential for accounting standard setters, as they can serve as indicators of changes in the financial states of maritime companies and of possible effects on users.

Suggested Citation

  • Nicholas Belesis & John Sorros & Alkiviadis Karagiorgos & Paraskevas Kousounadis, 2021. "Cumulative effect of IFRS 15 and IFRS 16 on maritime company financial statements: a hypothetical case," SN Business & Economics, Springer, vol. 1(3), pages 1-20, March.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:3:d:10.1007_s43546-021-00043-y
    DOI: 10.1007/s43546-021-00043-y
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    References listed on IDEAS

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    1. Nichols, Nancy B. & Street, Donna L. & Cereola, Sandra J., 2012. "An analysis of the impact of adopting IFRS 8 on the segment disclosures of European blue chip companies," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 21(2), pages 79-105.
    2. Steve Lin & William N. Riccardi & Changjiang Wang & Patrick E. Hopkins & Gary Kabureck, 2019. "Relative Effects of IFRS Adoption and IFRS Convergence on Financial Statement Comparability," Contemporary Accounting Research, John Wiley & Sons, vol. 36(2), pages 588-628, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Maritime sector; Shipping sector; International financial reporting standards; Effect of IFRS 15; Effect of IFRS 16; Financial statement analysis;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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