Transition to IFRS: Financial statement effects and taxation at the construction industry in Greece

George Drogalas,Grigorios Lazos,Andras Koutoupis,Michail Pazarskis

doi:10.22495/rgcv9i1p2

George Drogalas, Grigorios Lazos + Show 2 more

Open Access

https://doi.org/10.22495/rgcv9i1p2

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Abstract

This study evaluates the IFRS adoption on the financial statements and taxation of Greek companies at the construction industry in Greece, which are listed at the Athens Stock Exchange. The research computes the taxation amount paid and employs twelve accounting measures for the analysis of financial statements for the IFRS transition period (three years before and after their adoption in Greece). Regarding the taxation, the amount paid in the pre- to post-IFRS period was considerably decreased (about 28%). Regarding the examined accounting measures, the transition to IFRS lead to a deterioration of some basic financial ratios (more specifically, five profitability ratios) and could, therefore, affect the overall profitability and performance of the examined companies in their industry sector. Our results provide also evidence that IFRS adoption increased firm value, while a lower level of earnings can influence accounting quality and could be examined further as a red flag for earnings manipulation. The present study, as a recent empirical result of the IFRS impact and taxation on the construction sector in Greece, could be useful for policy makers, tax and other state authorities or managers.

Highlights

In the modern economic environment, the need for measurable accounting procedures is a very important issue both for academics or investors and other stakeholders (Wadesango et al, 2016; Alnodel, 2016; El-Bannany, 2018)
The transition from the Greek Generally Accepted Accounting Standards (GAAP) to the International Accounting Standards may have affected the image of the financial statements of the companies and, by extension, the accounting measures or financial ratios, which are employed at these situations to evaluate business performance
The transition from the national GAAP to the International Accounting Standards may have affected the image of the financial statements of the companies and, by extension, the accounting measures or financial ratios, which are employed at these situations to evaluate business performance

Summary

Introduction

In the modern economic environment, the need for measurable accounting procedures is a very important issue both for academics or investors and other stakeholders (Wadesango et al, 2016; Alnodel, 2016; El-Bannany, 2018). Globalization has fostered the need for worldwide comparable accounting standards and regulations in all financial markets (Iatridis & Rouvolis, 2010; Pazarskis et al, 2014). Iatridis & Rouvolis (2010) argued that the main differences between Greek Generally Accepted Accounting Standards (GAAP) and IFRS related to the presentation of financial results, the accounting treatment and depreciation of certain tangible and intangible fixed assets, research and development expenditure and capitalisation criteria, deferred taxation, and accounting for goodwill and goodwill amortisation. Regarding earnings management lower accounting quality could signalize earnings manipulation

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