RELEVANCE OF ALLOWANCE FOR LOAN IMPAIRMENT BEFORE AND AFTER THE IMPLEMENTATION OF SFAS 71
Abstract
Relevance means that accounting reports should be useful for users of financial statements in making investment decisions such as predicting future company performance and confirming or correcting the results of past company assessments. Information is said to be relevant if the information is used by investors in determining the value of the company. Changes in accounting standards are expected to affect the relevance of financial statements. One of the accounting standards that has changed in Indonesia is the implementation of accounting standard statement number 71 replacing PSAK numbers 50 and 55. The study aims to examine changes in the relevance of the value of loan impairment loss reserves (CKPN) before and after the implementation of PSAK 71. The research population is all banking companies listed on the Indonesia Stock Exchange (IDX) in 2018-2021. Banking sector companies listed on the IDX were chosen because they are entities with significant accountability that are required to use PSAK 71 in preparing financial statements starting in 2020. The final sample was selected using purposive sampling technique. value relevance testing using the price model developed by Ohlson (1995). The price model is estimated by OLS regression for period data and before and after the implementation of PSAK 71 separately. Value relevance testing uses the adjusted R value2 obtained from the estimation results. The results found that CKPN did not have value relevance in all periods, before, and after the implementation of PSAK 71. Earnings information proved to have value relevance in all observed periods. Book value of equity information is proven to have value relevance in all periods, before and after the implementation of PSAK 71.
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