After the first year of PSAK 71

Initial impact analysis on BUKU IV Banks

There has been a significant impact to the banks’ financial results since the transition to PSAK 71 on 1 January 2020, especially in impairment provisions.

The Indonesian banking industry is led by a handful of large banks categorized in BUKU IV, whose core capital exceeds 30 trillion Rupiah. BUKU IV banks are the focus of the analysis in this paper. 

In the 30 September 2020 (Unaudited) financial report of BUKU IV banks’, it is stated that PSAK 71 transition impact mostly related to two (2) areas: 1) classification & measurement; 2) Impairment. 

The analysis shows insignificant change of financial asset classification for the period of before and after the implementation PSAK 71. In contrast, at transition on 1 January 2020, the banks' saw substantial increases in total PSAK 71 impairment provisions of between 20% - 90%.

Furthermore, there is notable divergence in the PSAK 71 impairment modelling judgments and disclosure that make performing comparisons between the banks challenging. It is expected that over time these differences will reduce following regulatory pressure and peer group assessments, in particular reporting in uncertain times during COVID-19. 

We hope that preparers find this paper useful and consider the outcome of this report for future reporting periods.

Did you find this useful?