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IFRS 9 implementation indicating asset opacities: even though predicting earnings’ forecasts and value relevance in Asia-Pacific countries

Evy Rahman Utami (Department of Accounting, Faculty of Economics and Business, Gadjah Mada University, Yogyakarta, Indonesia and Department of Accounting, Universitas Muhammadiyah Yogyakarta, Bantul, Indonesia)
Sumiyana Sumiyana (Department of Accounting, Faculty of Economics and Business, Gadjah Mada University, Yogyakarta, Indonesia)
Zuni Barokah (Department of Accounting, Faculty of Economics and Business, Gadjah Mada University, Yogyakarta, Indonesia)
Jogiyanto Hartono Mustakini (Department of Accounting, Faculty of Economics and Business, Gadjah Mada University, Yogyakarta, Indonesia)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 13 February 2023

382

Abstract

Purpose

This study aims to investigate the opacity of bank assets because of the International Financial Reporting Standard (IFRS) 9 implementation. It highlights that the Asian-Pacific countries’ banking industries are experiencing economic volatility. In other words, it examines information asymmetries because of the standards requiring a mechanistic treatment. Thus, this focuses on the tragedy of the commons (ToTC) caused by the implementation of the standard.

Design/methodology/approach

This research selects a sample of banking firms in the Asia-Pacific region from 2010 to 2021. Furthermore, it examines the impacts of IFRS 9’s implementation on earnings forecasts and share-return conveyances. This research first uses the OLS regression for examining the bank assets’ opacities, which may affect future earnings and information conveyancing. Second, it arranges these opacities, earnings and stock returns with the 2-SLS regression to find the staging associations because of hierarchical relevances.

Findings

This study finds that bank assets’ opacity is caused by a standard’s implementation, which is a ToTC, and this study signifies its first occurrence. Simultaneously, it recognises an information asymmetry because of the implemented procedural calculation mandated by the standard. Furthermore, these opacities affect future earnings and information conveyancing that inherited information asymmetries, which have affected them as the second ToTC. Finally, current and future earnings as a consequent impact of asset opacity are recursively associated with stock return conveyancing as the third ToTC.

Originality/value

This study demonstrates hierarchical information about bank asset opacities, starting by recognising and measuring them in financial statements. Then, these recognised and measured asset opacities are associated with current and future earnings, ending on the ordinarily and staged influencing of stock return conveyancing. Moreover, it reveals hierarchical information in the direct-ordinarily and staged associations among bank asset opacities, earnings and return conveyances. Thus, these associations are valid and occur because of the mandates of the standard’s measurement.

Keywords

Acknowledgements

This paper is part of the first author’s dissertation at Universitas Gadjah Mada (UGM). The university’s Project Recognition Programme for the Year 2022, Number: 3550/UN1.P.III/Dit-Lit/PT.01.05/2022, has financed this research up to publication.

Citation

Utami, E.R., Sumiyana, S., Barokah, Z. and Mustakini, J.H. (2023), "IFRS 9 implementation indicating asset opacities: even though predicting earnings’ forecasts and value relevance in Asia-Pacific countries", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-08-2022-0282

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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