Day one effect of first implementation of IFRS 9 in Indonesian banking

Aria Farah Mita and Nur Aulia Rahmah

International Journal of Trade and Global Markets, 2023, vol. 17, issue 3/4, 348-354

Abstract: The change of IAS 39 to IFRS 9, effective on 1 January, 2020 in Indonesia, mainly related to the financial assets' classification and their impairment allowances. This study aims to provide preliminary observation on the first phase of IFRS 9 implementation in Indonesian banking, as the most affected industry, especially concerning the impairment allowances increase and its relationship with bank characteristics. This observation is important to explore as it may represent how the standard is applied in emerging economies. Using quantitative methods and data analysis techniques, this study processes data from quarterly financial reports of Indonesian listed banks. The result finds that the loan loss provision is increased significantly from the effect of the IFRS 9. Further analysis shows that banks with a higher ratio of nonperforming loans (NPLs) and larger sizes tend to have a higher impact on the increase in loan loss provision.

Keywords: IFRS 9; loan loss provision; impairment; expected credit loss; banking. (search for similar items in EconPapers)
Date: 2023
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