K-IFRS 제1109호 대손충당금의 적립 방법 변경 효과에 관한 연구: 보수주의와 가치 관련성을 중심으로

Kise Lee ; Seongil Jeon ; Wooyul Kim

(First Author) Changwon National University vic0103@hanmail.net
(Corresponding Author) Chonnam National University seongiljeon@gmail.com
(Co-Author) Korea Electric Power Corporation nein76@naver.com

A Study on the Allowance for Bad Debts due to K-IFRS No-1109 Adoption: Focusing on Conservatism and Value Relevance

Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

In 2018, K-IFRS No. 1109 (Financial Instrument) was Introduced. It was that firms were forced to allocate additional their allowance for bad debts. So This study analyze the change of allowance for bad debts after the government introduced K-IFRS No. 1109 (Financial Instrument). We also investigated whether this change can have an effect on firm's conservative. In addition, we analyze value of allocate allowance for bad debts.

Results of analyze are below. First, We was expected majority of firms to set up their allowance for bad debts higher. but, Some of firms allocated more allowance for bad debts. That firms also showed higher conservative compared to the other firms.

Secondly, it was negative relationship between additional allowance for bad debts and firm's value. So, we find out that CEO tries to recognize their loss timely and decrease uncertain about future loss, get their interested parties understand possibility of firm's future revenue and growing. That's why firms set-up more allowance for bad debts. Finally, In higher conservative firms, the allocation to additional allowance for bad debts tended to prevent firm's value from going down relatively.

Keywords:

K-IFRS Financial Instrument, Allowance for bad debts, Firm's Conservative

References

Bae, S. H., Kim, J. D(2012), “A study on the Income Smoothing Factors of Banks through Loan Loss Provisions,” Korea Association of Tax & Accounting, 34, pp.83-98. [https://doi.org/10.35349/tar.2012..34.005]
Basu, S(1997), “The Conservatism Principle and the Asymmetric Timeliness of Earnings,” Journal of Accounting and Economics, 24(1), pp.3-37. [https://doi.org/10.1016/S0165-4101(97)00014-1]
Beaver, W. H., and E. E. Engel(1996). “Discretionary Behavior with respect to Allowances for Loan Loss Accruals and Behavior of Security Prices,” Journal of Accounting and Economics, 22(1), pp.177-206. [https://doi.org/10.1016/S0165-4101(96)00428-4]
Choi, H. S(2003), “Discretionary Loan Loss Provisioning by Korean Commercial Banks and Stock Price Response,” Korean Journal of Financial Studies, 32(1), pp.35-70.
Collins, D. W., M. Pincus, and H. Xie(1999), “Equity Valuation and Negative Earning: The Role of Book Value of Equity,” The Accounting Review, 74(1), pp.29-61. [https://doi.org/10.2308/accr.1999.74.1.29]
Docking, D. S., M. Hirschey and E. Jones(1997), “Information and Contagion Effects of Bank Loan-Loss Reserve Announcements,” Journal of financial Economics, 43(2), pp.219-239. [https://doi.org/10.1016/S0304-405X(96)00895-1]
Givoly, D. and C. Hayn(2000), “The Changing Time-Series Properties of Eearnings Cash Flows and Accruals: Has Financial Reporting become more Conservative,” Journal of Accounting and Economic, 29(3), pp.287-320. [https://doi.org/10.1016/S0165-4101(00)00024-0]
Hayn, C(1995), “The Information Content of Losses,” Journal of Accounting and Economics, 20(2), pp.125-153. [https://doi.org/10.1016/0165-4101(95)00397-2]
Holthausen. R. W and R. L. Watts (2001), “The Relevance of the Value-Relevance Literature for Financial Accounting Standard Setting,” Journal of Accounting and Economics, 31(1), pp.3-75 [https://doi.org/10.1016/S0165-4101(01)00029-5]
Ji, H. M., Park, H. J(2006), “The Regulatory Capital Ratio Management of Saving Banks Using the Loan Loss Provisions,” Korean Accounting Journal, 15(s), pp.23-44.
Kanagaretnam, K., Lobo, G. J., Yang, D. H(2003). “Determinants of signalling by banks through loan loss provisions,” Journal of Business Research, 58(3), pp.312-320. [https://doi.org/10.1016/j.jbusres.2003.06.002]
Khan, M., and R. L. Watts(2009), “Estimation and Empirical Properties of a Firm-Year Measure of Accounting Conservatism,” Journal of Accounting and Economics, 48(2-3), pp. 132-150. [https://doi.org/10.1016/j.jacceco.2009.08.002]
Kim, H. J. and Lee, K. H(2015), “Accounting Practices for Allowance for Bad Debts due to K-IFRS Adoption in the Banking Industry,” Study on Accounting, Taxation & Auditing, 28(1), pp.1-32.
Kim, J. O and Bae, G. S(2007), “Corporate Governance and Accounting Conservatism: Evidence from Board and Audit Committee Characteristics,” Korean Accounting Review, 32(3), pp.89-115.
Kim, M. H(2018), “Discretionary Loan Loss Provisions and Stock Market Response: A Comparative Analysis of Commercial Banks and Savings Banks in Korea,” The Korean Journal of Financial Management, 35(3), pp.189-216. [https://doi.org/10.22510/kjofm.2018.35.3.008]
Kim, S. S and Koh, U. S(2011), “A Study on the Taxation Effects of Banking Business Allowance for Bad Debts due to K-IFRS Adoption,” Korean Accounting Journal, 20(1), pp.109-134.
Ma. C(1988), “Loan Loss Reserves and Income Smoothing. The Experience in the U. S. Banking Industry,” Journal of Business Finance & Accounting, 15(4), pp.487-497. [https://doi.org/10.1111/j.1468-5957.1988.tb00150.x]
McNichols, M., and P. Wilson(1988), “Evidence of Earnings Management from the Provision for Bad Debts,” Journal of Accounting Research, 26, pp.1-31. [https://doi.org/10.2307/2491176]
Moon, H. J.(2005), “The Discretionary Behaviors of Loan Loss Provisions for Banks and Their Value Relevance,” Korean Accounting Journal, 14(1), pp.1-26.
Myers, J(1999), “Implementing Residual Income Valuation with Linear Information Dynamics,” The Accounting Review, 74(1), pp.29-61. [https://doi.org/10.2308/accr.1999.74.1.1]
Ohlson. J(1995), “Earnings, Book Values and Dividends in Security Valuation,” Contemporary Accounting Research, 11, pp.661-687 [https://doi.org/10.1111/j.1911-3846.1995.tb00461.x]
Park. S. J.,Hue, K. B. and Ma, H. Y(2011), “The Impacts of the K-IFRS Introduction on Allowance for Bad Debts: A case study on mutual savings banks,” Korean Accounting Journal, 20(2), pp.123-152.
Penman, S. and X. Zhang(2002), “Accounting Conservatism, the Quality of Earning, and Stock Return,” The Accounting Review, 77(2), pp. 237-264. [https://doi.org/10.2308/accr.2002.77.2.237]
Seo, B. H. (2018), “Effects and Implications of Changing Accounting Standards for Domestic Banks,” Weekly Financial Brief, 27(17), pp. 12-15
Wahlen, J. M(1994), “The Nature of Information in Commercial Bank Loan Loss Disclosures,” The Accounting Review, 69(3), pp.455-478.

∙ The author ki Se Lee is Part－time Lecturer, in the School of Business at Kumoh National Institute of Technology, Changwon National University, Yeungnam University. he was Post-doctoral researcher of School of business Kyungpook National University. He holds a Ph.D. in accounting from Channam National University. His research interests are in the areas of high-grow firm, Credit rating, and DEA.

∙ The author Seongil Jeon is professor of accounting in the School of Business at Chonnam National University. Prior to joining Chonnam National University, he was research professor of School of business SungKyunKwan University. He holds a Ph.D. in accounting from KyungHee University. His research interests are in the areas of intangibles assets, stock price crash risk, disclosure quality, and market efficiency.

∙ The author Wooyul Kim is a senior manager in Korea Electric Power Corporation. He is a Master Candidate in accounting from Chonnam National University.