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The impact of IFRS adoption on financial ratios: evidence from listed manufacturing companies in Sri Lanka

Authors:

R. A. S. Rajapaksha ,

University of Kelaniya
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M. D. P. Kawshalya

University of Kelaniya, LK
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Abstract

Since the world economy is getting globalized, the pass practices of accounting could not be able to satisfy the information requirement of global stakeholders. Therefore the concept of harmonizing the accounting practices has been put forward and realized by the implementation of International Financial Reporting Standards (IFRS) issued by International Accounting Standard Board (IASB).The main purpose of this research is to examine the impact of adopting IFRS on financial ratios in Sri Lankan listed manufacturing sector companies. The data were collected for the period of eight years from 2008/2009 to 2015/2016 by using annual report published on listed manufacturing sector in Colombo Stock Exchange (CSE). The total sample period is divided to two part as pre IFRS & post IFRS adoption periods for comparison. The ratios which are selected to the analysis are current ratio, earning per share, debt to equity ratio & return on equity ratio. The findings of the study suggest that there is no significant difference between the ratios calculated as per previous local accounting standards and as per IFRS except earnings per share ratio and current ratio. The impact was not found to be significant for debt equity ratio and return on equity ratio. The IFRS adoption is more likely to exhibit a favorable impact on financial statements. This study adds new knowledge to the existing literature of IFRS adoption since the data used are more recent than most IFRS studies around the world and the study focuses on a content of developing country while most of other studies have carried out in the context of developed countries.
How to Cite: Rajapaksha, R.A.S. and Kawshalya, M.D.P., 2021. The impact of IFRS adoption on financial ratios: evidence from listed manufacturing companies in Sri Lanka. International Journal of Accounting and Business Finance, 7(2), pp.46–66. DOI: http://doi.org/10.4038/ijabf.v7i2.94
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Published on 30 Dec 2021.
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