The FSA (Financial Statement Analysis) Working Group releases

- Recent trends in customer and supplier payment periods on the eve of the Covid crises (Trade Credit_Report) and

- Financing costs and financial pressure: were non-financial corporations prepared for the pandemic crises? (The Financing Costs of NFC in European Countries)

The BACH WG has published a new Outlook document: Past economic performance of climate policy relevant sectors

This analysis utilizes BACH data from 11 European countries (Austria, Belgium, Czech Republic, Germany, Spain, France, Croatia, Italy, Poland, Portugal and Slovakia) to assess the structure and evolution of non-financial corporations in climate policy relevant sectors (CPRS) and non-CPRS. The aim is to highlight structural differences both over time and between the sectors. Therefore, the analysis considers the asset-capital structure, as wells as the income-cost structure.

Structural differences between CPR and non-CPR sectors were most prominent with respect to their capital intensity, with CPRS having a larger share of long-term assets. Both sectors went through a deleveraging process over the period from 2007 to 2019. In addition, short-term debt has been replaced by long-term debt. The data also suggests that growth dynamic has been stronger in non-CPRS, which was accompanied by a stronger increase in staff costs. Profitability gaps between CPR and non-CPR sectors harmonized across countries until 2019. Regarding profitability, CPRS offered higher returns on sales whereas non-CPRS yielded higher returns on assets.

The ERICA WG has published a new “ERICA series” document: "IFRS 15 - First application impact"

In 2018, the International Accounting Standard IFRS 15 on "Revenues from contracts with customers" came into force. Its impact is analysed based on the 2018 figures. One of the main effects of the standard application is that it can imply changes in the temporal distribution of revenue recognition and its associated costs, which might as well imply an impact in other areas of analysis. The main outcome of the ERICA Series is that the overall impact of the new standard on equity remains limited. At a more detailed country or sector level, the largest equity effects are negative.

This article published by Banco de España not only describes developments in the profitability, solvency and liquidity of Spanish non-financial corporations, drawing on the integrated spanish CBSO database, which contains annual information up to 2019 but also analyses the impact of the COVID-19 crisis on the profitability and the solvency of the corporate sector in 2020, on the basis of various microsimulations.

The findings show on one hand that the decline in profitability appears to have been particularly steep in the SME segment and, especially, in the sectors hardest hit by the crisis. On the other hand the results show that the crisis seems to have prompted a sharp rise in the financial pressure borne by the firms, in addition to undermining, albeit more moderately, their solvency.

You can see the whole article here.

ERICA WG has published its document: "European non-financial listed groups: Analysis of 2019 data"

The study presents some highlights of European non-financial listed groups, on profitability and financial structure in 2019, as well as financial debt structure and cost of debt. One of the main findings of the study is that the deterioration in operating results and profitability, that started in 2018, continued in 2019. The first application of the new accounting standard for leases – called IFRS 16 – resulted in poorer solvency and higher net indebtedness but did not stop the downward trend in the cost of financial debt. An exceptional additional chapter is devoted to the impact of the Covid-19 pandemic crisis on the financial performance and structure of European non-financial listed groups during the first half of 2020. Unsurprisingly, 2020 half-year figures demonstrate that the Covid-19 crisis seriously affects their profitability and solvency.

ERICA (European Records of IFRS Consolidated Accounts), is a database, for internal use within the members of ECCBSO, composed of a dataset of around 1,000 European non-financial groups, fully representative of the stock markets of the countries participating in the project (Austria, Belgium, France, Italy, Germany, Greece, Portugal, Spain and Turkey). The data are obtained from publicly available financial statements, having been treated manually, by CBSO statistics and accounting specialists, to be fitted on a standard European format (ERICA format). This manual treatment means, in some cases, the interpretation of the original data, a constraint that readers of this document should bear in mind.

The ERICA WG has published a new “ERICA series” document: "IFRS 16 Leases - Expected Impact"

IFRS 16 Leases represents the biggest change to lease accounting in over 30 years. The goal of this analysis is to ascertain ex ante the impact of IFRS 16 on the ERICA dataset and give detailed insight into this. The main impacts are expected to be an increase in financial liabilities and an increase in EBITDA.

The ERICA WG has published a new “ERICA series” document: "The risk-return paradox after IFRS adoption by European listed groups"

This analysis tests the existence of the risk-return paradox in European listed non-financial groups after adoption of the IFRS and addresses its drivers using an up-to-date approach: cluster analysis. The risk-return paradox implies a negative association between corporate returns and risk. The results reveal that the higher-risk cluster tends to perform worse, while the lower-risk cluster performs better.

ERICA WG has published its document: "European non-financial listed groups: Analysis of 2018 data"

The study presents some highlights of European non-financial listed groups, on profitability and financial structure in 2018, as well as financial debt structure and cost of debt. ERICA (European Records of IFRS Consolidated Accounts), is a database, for internal use within the members of ECCBSO, composed of a dataset of around 1,000 European non-financial groups, fully representative of the stock markets of the countries participating in the project (Austria, Belgium, France, Italy, Germany, Greece, Portugal, Spain and Turkey). The data are obtained from publicly available financial statements, having been treated manually, by CBSO statistics and accounting specialists, to be fitted on a standard European format (ERICA format). This manual treatment means, in some cases, the interpretation of the original data, a constraint that readers of this document should bear in mind.

FSA WG has worked on different tools for better visualization of the outcomes. Infographic report for interest coverage ratio presents the percentage of number and debt for weak, vulnerable and resilient firms between the years 2000 and 2017.

Link to the FSA WG publication section

The ERICA WG has published a new “ERICA series” document: “Employment and relative labour costs”. This document examines the distribution of group-level labour costs in different countries, based on consolidated data from non-financial listed groups, gathered in the ERICA database for the accounting period 2017. A cross-country comparison for the globalized labour costs per full-time equivalent (FTE) was made by decomposing the differences between countries into intrinsic and structural components, in order to understand whether the difference between country ratios is mainly due to differences in the real labour cost per FTE or to differences in the structure of the countries’ group population.