The transition from the Greek accounting system to IFRS: evidence from the manufacturing sector

Abstract

Over the past few decades, globalisation and the expansion of business investments and capital markets have led to a demand for high quality accounting information. Regulation (EC) No. 1606/2002 was applied in line with the process of internationalisation, involving the mandatory adoption of International Financial Reporting Standards (IFRS) by all listed European companies from 2005 onwards. The primary objective of this study is to examine whether the mandatory adoption of IFRS in the EU has affected the structure of a specific set of Greek companies reporting under IFRS and under the Greek accounting system (GAS). We therefore conducted our investigation on a sample of 38 Greek manufacturing firms reporting under the GAS and under IFRS for the same year 2004, which also traded on the Athens Stock Exchange (ASE) during the above-mentioned period. The study is based on their balance sheet and income statement figures prepared both under the GAS and IFRS model. We then analysed the quantitative effects of IFRS adoption on key accounting financial ratios in relation to the Greek accounting system. The results indicate that the adoption of IFRS affects the magnitude of accounting ratios, such as the asset turnover ratio, the ratio of owner's equity to total assets, the ratio of total liabilities to total equity, and the ratio of owner's equity to total liabilities.