The Impact of IFRS 16 on the Financial Reporting Accuracy in the Airline Industry

Accounting harmonization enables the comparison of financial reporting and enhances its usefulness. The IFRS was developed to achieve such harmonization in a globalized world. This study focuses on the impact of transitioning from IAS 17 to IFRS 16 within the European airline industry. We conducted a quantitative analysis using non-parametric statistical tests to evaluate the impact on financial and economic ratios and compare the periods before and after the change, covering the period from 2018 to 2024. Our results show that both financial ratios and economic ratios were significantly affected by IFRS 16 adoption; namely, in contrast to prior studies, we show that ROE is significantly and positively affected, an important contribution of this study. Additionally, the size and type of airline company (low-cost, full-service, and flag airline companies) maintain these impacts, representing an innovative approach to this study compared to previous research. Overall, by recognizing both assets and liabilities in financial statements, IFRS 16 allows stakeholders to gain an accurate understanding of a firm’s capital structure and performance. This study contributes empirical evidence to the prior literature about the benefits of the new lease accounting standard and to improving the scientific knowledge on this topic.