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korean management review - Vol. 50, No. 3

[ Article ]
korean management review - Vol. 50, No. 3, pp.805-828
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 30 Jun 2021
Received 09 Sep 2021 Revised 15 Jan 2021 Accepted 09 Feb 2021

A Study on the Allowance for Bad Debts due to K-IFRS No-1109 Adoption: Focusing on Conservatism and Value Relevance
Kise Lee ; Seongil Jeon ; Wooyul Kim
(First Author) Changwon National University (
(Corresponding Author) Chonnam National University (
(Co-Author) Korea Electric Power Corporation (

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

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.


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

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∙ 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.