INFORMATIVENESS OF LEASES ACCOUNTING: EVIDENCE FROM TAIWANESE TRANSPORTATION INDUSTRIES

This study attempted to explore and compare whether financial leverage and profitability have increased and the value relevance of lease accounting has improved since IFRS 16 implementation. The study uses pre- and post-IFRS 16 implementation data to examine its impacts on 18 publicly traded Taiwanese companies in the transportation industry. To determine increases in the financial leverage and profitability of individual companies post-IFRS 16 implementation, a nonparametric Wilcoxon signed-rank test was used. To determine improvement in the value relevance of lease accounting after IFRS 16 implementation, the test model was established based on the residual income model. All variable data were collected from the quarterly financial reports of the 18 transportation companies in the sample published between pre-IFRS 16 (Q1/2017 - Q4/2018) and post- IFRS 16 periods (Q1/2019 - Q2/2020). The findings indicate that both average debt-to- asset and debt-to-equity ratios were significantly higher in the study sample during the post-IFRS 16 period compared to the pre-IFRS 16 period, but profitability did not increase significantly. In terms of value relevance, the study findings show that post-IFRS 16 implementation offers higher incremental explanatory power for changes in share price compared to pre-IFRS 16 implementation—in other words, IFRS 16 provides more useful information for investment decisions.