The Impact of IFRS 16 (PSAK 73) Implementation on Key Financial Ratios: An Evidence from Indonesia

Abstract

IFRS 16 was issued to overcome the criticism of IAS 17, especially regarding the fact that many lease transactions on lessee are not included in the statement of financial position (off-balance-sheet), making it difficult for users to get an accurate view of the assets and liabilities of the leasing company, as well as being difficult to estimate the amount that is off-balance-sheet. After the adoption of this standard, companies with significant operating leases are likely to experience an increase in assets, an increase in liabilities, and a decrease in equity, which can significantly affect their financial ratios. This research objective was to determine the impact of the application of IFRS 16 (PSAK 73) on the financial statements and key financial ratios of an airline company in Indonesia. This research focused on the airline operator company, PT Garuda Indonesia Tbk, which utilizes a lot of lease financing in the procurement of their aircraft fleets. This research has a very appropriate momentum considering that 2020 is the beginning of the implementation of IFRS 16 (PSAK 73) for all public companies in Indonesia. This research used a case-study approach. The results show that the level of profitability (ROA), solvency, and efficiency in the use of assets experience a decline, but the liquidity ratio and profitability (ROE) increase.

Leases Financing, Liquidity, and Return on Equity of Selected Manufacturing Companies in Nigeria: Implication of IFRS 16 Leases

“…In contrast, the inflation rate (INFR) has a negative and statistically insignificant connection with the PER, with a coefficient of -0.046, and is positive when the control variable is taken into account. The findings of the study were found to be in line with the findings of previous investigations Silvana, Valerico, Daniel & Federico [31]; Susanti, Sufiyati & Dewi [34]; Diaz, Hernandez & Voicila [14]; Bello, Ahmad & Al-Mustapha [9]. On the contrary, the findings of Musa [45] and Bontas [8], both of which reported detrimental impacts, were found to be contradictory with the findings of the study.…”

“…Susanti, Sufiyati, and Dewi [34] investigated the impact of IFRS 16 implementation on selected Indonesian companies' key financial ratios. The research focused on the impact of airline operational performance and lease financing on the financial situation of airline operators, as well as the impact on their return on equity (ROE) and return on assets (ROA) based on total earnings.…”

“…Investment decisions and the possible outcomes, opportunities, and inherent risk assessments are holistically considered putting return on equity in perspective, as corporate management generates revenue and corporate growth from equity financing [25], hence return on equity is consistently in use to evaluate optimal utilization of corporate funding and shareholders tend to evaluate the performance of companies among their contemporaries in terms of performance [10]. Studies have documented that some of the problems of many manufacturing companies have been the leases financing and outright asset purchasing knowing that the manufacturing companies are associated with the heavy plant, property, and equipment that are quite expensive to buy or replace [34].…”

A Conceptual Framework to Analyse Illicit Financial Flows (IFFs)

“…In addition, the perspective of normative accounting theory is that it can predict management's decisions, with regard to accounting policies, to maximise their own best interests (Nasution et al 2020). Furthermore, the normative accounting theory guides policymakers on what should be done, based on theoretical principles (Susanti et al 2021). Within this research, the possible characteristics of IFFs are identified, which could enhance financial reporting transparency, while discouraging IFFs.…”

Indonesia's Capital Structure And Company Profitability Before And After The Implementation Of PSAK 73

“…Proksi ROE mengikuti proksi yang digunakan oleh (Safitri, Lestari, and Nurhayati 2019;Nomorissa and Lindrawati 2021;Rahmawati 2021). Proksi ROA mengikuti proksi yang digunakan oleh (Safitri, Lestari, and Nurhayati 2019;Nomorissa and Lindrawati 2021;Rahmawati 2021;Susanti et al 2021). Pengujian hipotesis dalam penelitian ini dilakukan dengan uji beda paired sample t-Test atas variabel-variabel penelitian dengan menggunakan data sampel yang saling berpasangan.…”