Financial Ratio Analysis of Listed Construction Companies in Taiwan Before and After Adopting IFRS
| Autor: | Yen-Heng Chen, 陳彥亨 |
|---|---|
| Rok vydání: | 2014 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 102 Ever since the adoption of International Financial Reporting Standards(IFRS) in 2013, the greatest challenge that the Construction Industry has been facing is the change of revenue recognition of “Pre-sale real estate”, which makes revenue, costs, and net income fluctuate, and casts doubt on the financial performance of construction companies. Before the adoption of IFRS, the revenue of “Pre-sale real estate” was recognized following Generally Accepted Accounting Principles(R.O.C GAAP). A “Pre-sale real estate” could be recognized under the percentage of completion method of accounting, once it satisfied so called “six conditions”. However, after the adoption of IFRS, “Pre-sale real estates” can no longer be recognized under the percentage of completion method of accounting, since they do not satisfy the definition of construction contract in IAS11. That is to say, the revenue of “Pre-sale real estates” can be recognized only when the constructions are 100% completed, following the rules of IAS18. Therefore, it is possible that the revenue, costs, and net income of a company would rise sharply in the years that “Pre-sale real estates” are completed. First of all, using listed construction companies’ “Pre-sale real estates” from 2003 to 2012 in Taiwan as sample data, this research transfers the revenue recognition method from the percentage of completion method of accounting to the revenue recognition method in IAS18, which puts off the recognition of all the revenue, costs, and profits of those “Pre-sale real estates” to the year they are completed. Secondly, this research calculates eight key ratios including Accounts Receivable Turnover Ratio, Inventory Turnover Ratio, Fixed Asset Turnover Ratio, Return on Assets, Return on Equity, Interest Cover, Net Profit Margin, and Earnings Per Share using data before and after transformation. Finally, this research compares the difference between ratios using data before and after transformation to verify whether the financial performance of construction companies will fluctuate after the adoption of IFRS. The result shows that nearly half of the sample companies’ financial performance fluctuates sharply. Through the observation of these sample companies, this research concludes that─(1) The more concentrated the completion years of “Pre-sale real estates” are, the more apparent the fluctuation of the key ratios will be. (2) The construction companies that earn profits mainly on “Pre-sale real estates” will be affected more seriously by adopting IFRS. (3) The “scale” of a project is more influential than the “number” of projects to determine whether the ratios will fluctuate sharply. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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