Some observations on the first-time adoption of IFRS 16 in the context of lessee airlines

This thesis focuses on the first-time adoption of International Financial Reporting Standard 16 Leases. By establishing a global sample from the airline industry which is one of the most lease oriented industries, it analyses three issues in the context of lessee perspective: (1) presentation of leased (right-of-use) assets and lease liabilities on the statement of financial position, (2) change in financial position of the airlines by analyzing liquidity, solvency, and profitability ratios considering prior year and restated prior year financial statement values of airlines that adopted IFRS 16 on a full-retrospective basis, and (3) compliance level of mandatory disclosures of lessee. The research reveals that more than 50% of airlines report their leased assets and lease liabilities as a separate line item on the face of the statement of financial position. In terms of change in ratios, typical ratios indicate that net working capital and current ratio declined in terms of liquidity, debt to equity and debt to assets ratios increased in terms of solvency and total asset turnover also declined in terms of asset efficiency. However, some ratios should be analyzed on a case-by-case for each airline. Regarding disclosure requirements, airlines report their additions, depreciation expenses, carrying amounts, interest expenses, maturity analysis, and total cash outflows for leases. However, they declare that they benefit from exemption of reporting short-term leases and leases of low-value assets, but they don't usually report their expenses for such leases. In addition, diversity of reporting has been observed. Further research is to analyze presentational and disclosure issues for the second year of IFRS 16's adoption to observe any improvements in reporting. Keywords: IFRS, Leases, IFRS 16, First-time Adoption, Airline Industry.