ANALYSIS OF FACTORS AND EFFECTS OF PSAK 24 REVISI 2013 IMPLEMENTATION IN INTERIM FINANCIAL REPORT 2015
Muhammad Adri Hakim, Dwi Martani
Akuntansi, Fakultas Ekonomi dan Bisnis, Universitas Indonesia
Abstract
The purpose of this research is to provide empirical evidence about factors that influence the company’s decision to implement PSAK 24 (2013) Employee Benefits in an interim financial report of 2015, the effects for company that implement these standard, and how company disclose information related to the implementation and efect of PSAK 24 in the interim financial report of 2015. This research included companies listed in Indonesia stock exchange by using logistic regression analysis. The result of this research indicate that implementation of PSAK 24 in interim financial report influenced by market capitalization, number of employee, and auditor. This research also provides results in which disclosure of the implementation and effect of most companies have been appliying PSAK 24 in financial interim report of 2015 has been done in accordance with the rules ini PSAK 24.
Keywords:PSAK 24;IAS 19; IFRS; Employee Benefit; Interim Financial Report; IFRS Implementation; IFRS Convergence.
1. INTRODUCTION
Each company employs a number of employees in its business. Companies are employers who have obligations to employees that employee benefits. The level of materiality of the value of the employee benefits will affect how the entity present the information records of PSAK 24. PSAK 24 changes have a significant effect on the entity that owns the rewards in the form of defined benefit pension and other long-term benefits.
PSAK 24 (2013) is the adoption of IAS 19 Revised 2011. After 2011, IAS 19 underwent two revisions, namely in 2013 and 2014. Revised PSAK 24 will have an impact on the presentation of reclassification and so the company had to apply the new method retrospectively. In the transition mentioned that this applies PSAK retrospectively, except for the adjustment of asset values and sensitivity analyzes. As a result of these changes the company will present three statements of financial position comparative year are 2015, 2014 and early comparative period of 2014. Changes in PSAK 24 will also produce other comprehensive income (OCI) in the statement of income and other comprehensive income and OCI in equity.
Fasshauer et al., (2008) conducted a study on the application of accounting standards for employee benefits, IAS 19 Employee Benefit, on companies in 20 European countries. The companies are analyzed using three methods in the measurement of employee benefits. The method consists of a full recognition through the Statement of Recognised Income and Expense (SORIE), full recognition through Profit & Loss, and the 'standard' corridor approach. The results of these studies show that companies that apply IAS 19 that uses the latest full recognition method through the Statement of Recognised Income and Expense (SORIE) better in disclosing information related to employee benefits. The application of IAS 19, based on full recognition through the Statement of Recognised Income and Expense (SORIE) also carries a significant effect on the balance sheet and income statement. In this study also suggested that the measurement of employee benefits should only use a single method that is full recognition through the Statement of Recognised Income and Expense (SORIE).
Early adoption of of a new standard can be seen as a standard adoption. Research conducted by Harahap (2010) explained that the decision about the time of change to PSAK 24 on financial statements is influenced by the size of the company, the estimated costs, debt agreements less restrictive, positive change of Return On Equity (ROE), and public accounting firms which audits. Larger company tends to be faster in applying PSAK 24, the company estimates the cost of implementing PSAK 24 is greater, not first to apply, the company's policy against the debt agreement does not affect the timing of the application of PSAK 24, companies with positive changes ROE would be faster to apply PSAK 24, and a large public accounting firms (Big 4), which audits influence to the implementation of PSAK 24.
This research aims to analyze how the application of IAS 24 changes in the interim financial report 2015. The use of interim financial report will be interesting because there are many companies that turned out to not apply it in the beginning of the interim period, even though the application of IAS 24 Revised 2013 effective starting January 1, 2015.
This research consists of an introduction, literature review and hypothesis development, research methods, research and discussion, and conclusion.
2. LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT
Employee benefits are all forms of benefits granted an entity in exchange for services rendered by employees or for the termination of the employment contract. Employee benefits include benefits granted to workers or their dependents or beneficiaries and may be settled by payments (or the provision of goods or services), either directly to workers, husbands / wives, children or other dependents or to others, such as insurance companies.
There are three major changes in the PSAK 24 (2013) which are how to calculate pension cost, the recognition of actuarial gains and losses, and disclosures. The change will significantly affect the value of post-employment benefit obligations which will be presented in the financial statements. The recognition of actuarial gains and losses as a component of comprehensive income will significantly affect the company's total equity. Disclosures made more comprehensive by explaining the characteristics, the amount arising from the program in the financial statements and the sensitivity analysis on defined benefit plans. Revised PSAK 24 will have an impact on the presentation of reclassification and so companies should apply retrospectively using the new method.
The application of a new accounting standard due to changes in accounting standards requires the entity restated financial statements have been published and audited, it is in accordance with the rules in PSAK 25 regarding accounting policies, changes in accounting policies, estimates and correction of errors. PSAK 24 (2013) effective on January 1, 2015. Consequently, the financial statements issued after January 1, 2015 must use the provisions of the new standard.
According to PSAK No. 3 (2010) Interim Financial Reporting states that interim financial report is a financial report that contains either a complete financial statement (as described in PSAK 1 (2009) Presentation of Financial Statements) or a financial report summary (as described in this Statement) to an interim period. Interim period is a financial reporting period shorter than a full financial year.
But in reality, not all companies implement new standards when preparing the interim financial statements. Though described in PSAK 3 that the interim financial statements are prepared using the accounting policies together with the annual financial statements. Large companies are the focus of attention of investors that tend to be applying accounting policies early (Castello et al. 1994). Companies that have larger debts will perform faster adoption of standards (Sami and Welsh, 1992) but according Castello et al. (1994) actually found the opposite. According to Amir and Livnat (1996 and Langer and Lev (1993) companies are adopting standards at baseline had earnings changes are relatively smaller, but the results are opposite to the Castello et al. (1994) that changes high profit company audited by the firm of repute high inclined to make early adoption of the standard (Trombley, 1989). In a study of adoption PSAK 24 Employee benefits by Harahap (2010) found that the total assets, changes in ROE and auditors have a positive influence on the early adoption of accounting standards.
Hypothesis Development
Market capitalization is an indicator of the development of a stock market. The market capitalization of the company's capital illustrates assessed on the number of outstanding shares and stock prices. The market capitalization has an important role, which gives an overview of the market capitalization of companies active in the stock market of a country, so that the information disclosed in the company is very important especially for investors in the stock market. Companies with large capitalization value tends to be more attention from investors and prospective investors, because investors generally invest viewed capitalization and stock price on the exchange. Presentation of information and the application of an accounting standard that is the latest in the interim financial report is very important in the decision making for investors and prospective investors, the company should pay more attention to information presented in the interim financial statements. It was developed in the following hypothesis:
H1: Companies with larger market capitalization have the possibility in implementing PSAK 24 (2013) earlier
Companies with a large number of employees, tend to spend more compared to companies with fewer employees, but the company with a large number of employees who usually is a great company, international and influential in driving the economic growth of a country. Companies with a large number of employees who will have the burden and obligations and employee benefits were great, so that the disclosure of information related to employee benefits becomes very important. Companies with larger number of employees is expected to be faster in applying PSAK 24 (2013) because the standard is closely related to the company's obligation to its employees and also government regulations relating to the welfare of employees. It was developed in the following hypothesis:
H2: Companies with a larger number of employees have possibility in implementing PSAK 24 (2013) earlier.
This research was conducted to test whether the debt to equity ratio may affect the company's decision to implement IAS 24 Revised, 2013 interim financial report. To run its business activities the company needs funds, in order to run properly. Funds are required to cover all or part of the cost is required and needs expansion or new investment. According to Kashmir (2010) Debt to Equity is the ratio used to assess the debt and equity, by comparing all the debt for equity. The application of IAS 24 Revised 2013 influence to changes in the value of liabilities and equity. Companies with a larger debt to equity is expected to be faster in applying IAS 24 Revised, 2013, due to the amount of debt the company is bigger, so the disclosure of information is expected to be delivered sooner. It was developed in the following hypothesis:
H3: Companies with a larger Debt to Equity Ratio (DER) have possibility in implementing PSAK 24 (2013) earlier.
Harahap (2010) also conducted a research of changes of return on equity (ROE), change in PSAK 24 (2013) retrospective nature resulted in a change to equity in prior years. Changes to equity will result in changes ROE, ROE for changes in the past years become a basic consideration for deciding the application of PSAK 24 (2013), the company with the change of positive ROE (favorable) is expected to be faster in applying PSAK 24 (2013). ROE changes that can positively make it easier for management to attract investors and not to worry on earnings management is done, because small changes in ROE. In this research carried out modifications where changes favorable ROE is a great change in ROE, ROE great changes resulted in significant changes to the information, which the company should present the information as soon as possible. It was developed in the following hypothesis:
H4: Companies with a larger change in Return On Equity (ROE) have possibility in implementing PSAK 24 (2013) earlier.
Harahap (2010) also mentions that companies audited by public accounting firms were great also faster in applying PSAK 24 (2013). Revised large public accounting firm will generally be offered to clients to implement the new standards as soon as possible, due to large public accounting firms tend to keep the integrity of its affiliates in the world. Large public accounting firms are considered better understand the regulation of new accounting standards than small ones, this can be evidenced by the issuance of central module of their affiliates if the new standards are issued. Therefore the companies audited by a large public accounting firms are expected to be faster in implementing PSAK 24 (2013). It was developed into a hypothesis as follows:
H5: Companies audited by a public accountant's office "Big 4" have possibility in implementing PSAK 24 (2013) earlier.
3. RESEARCH METHODS
This research is using descriptive statistical analysis, logistic regression, and qualitative analysis. This research aimed to analyze the factors and the impact of PSAK 24 (2013) in an interim financial report 2015. The analysis also conducted on disclosures relating to the implementation of PSAK 24 (2013).
This research uses regression model similar to the regression model on research Harahap (2010) with modifications. Here is a model of research that will be used:
Adoption Timing = α + ᵝ1 CAP + ᵝ2 EMPLOYEE + ᵝ3 DER + ᵝ4 ROECHANGE + ᵝ6 AUDITOR + ε
Adoption Timing / : / Dummy variable, the value 1 to companies that adopt PSAK 24 (2013) of the interim financial statements and the value 0 for companies that do not adopt in the interim financial report 2015CAP / : / The market capitalization value in 2015
EMPLOYEE / : / The number of employees of the company in 2014
DER / : / Debt to Equity Ratio 2014
ROECHANGE / : / Return On Equity change from 2013 to 2014
AUDITOR / : / Dummy, value 1 to companies audited by audit firms "Big 4" and the value 0 for companies that are not audited by audit firms "Big 4"
The dependent variable is the variable that is observed and measured to determine the effects caused by the independent variable. The dependent variable in this study is an interim financial report 1st quarter (Q1), second quarter (Q2) and third quarter (Q3) 2015 as liabilities of the company to comply with applicable regulations in the PSAK. This variable is a dummy variable that will be worth 1 if a company has done the application of PSAK 24 (2013) and a dummy variable will be 0 if a company has not made the application of PSAK 24 (2013).