International Financial Reporting Standards versus Czech Accounting Standards in financial ratios of Czech companies

Abstract

As a result of globalization, the transfer of ownership to the hands of foreign firms, as a result of acquisitions and mergers, the accounting entity switches to other accounting systems. In the US, the Generally Accepted Accounting Principles accounting standard is used, the International Financial Reporting Standards accounting system is increasingly being promoted in Europe, and the Czech Accounting Standards are the most widely used in the Czech Republic. However, some Czech companies also keep IFRS accounting not only for the purpose of business comparability with other SBUs operating in Europe, but also because it is a necessary condition for entering a company on the stock exchange. Also, the Prague Stock Exchange (BCPP) requires companies with traded securities to disclose their financial statements in the form of financial statements prepared in accordance with IFRS. The aim of this paper is to compare selected indicators of financial analysis and to verify the hypothesis that the chosen accounting system influences the economic performance of the enterprise expressed through financial ratios. For owners, investors and management are the key financial indicators the profitability ratios. The statistical significance of the research has shown that the financial ratios of return on assets and return on capital employed differ according to used accounting standards. On the other hand, return on equity ratios also showed different values, but this difference was statistically confirmed with lower significance level.