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

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.

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