A comparison between PSAK 71 and PSAK 55 in the banking industry

Abstract

Economic activities ascending from the use of PSAK 55 (Statement of Financial Accounting Standards) are alleged to be the cause of the Indonesian bank system instability when facing the global financial crisis in 2008. PSAK 55 results in CKPN (allowance for impairment losses) allocation on a procyclical nature. Therefore, it is expected that   PSAK 71 implementation avoids procyclical CKPN that does not reflect sustainable financial performance. The current study is conducted to test the effectiveness of PSAK 71 implementation in hindering procyclical and credit crunch mitigation. The study’s population is the banking industry listed on the Indonesian Stock Exchange from 2008 to 2020. The data are then descriptively analyzed using descriptive analysis and the Wilcoxon Rank Test. The findings show that: 1) there is a significant difference in CKPN between PSAK 55 and PSAK 71 implementations, with no significant difference in the CAR and profit values, 2) there is no significant difference in the CKPN value applied based on PSAK 71 before and after entering the COVID-19 pandemic, and 3) there are significant differences in credit disbursement during the 2008 crisis and the 2020 crisis due to the COVID-19 pandemic.