Review Journal “Financial Instrument Disclosure: Comparison of Indonesian and UK Banks”

Author:

Sylvia Veronica Siregar, Chaerul Djusman Djakman, Ayu Maharani, Aria Farahmita, Agustin Setya Ningrum

 

Release:

International Journal of Finance and Accounting 2016, 5(1): 62-66    DOI: 10.5923/j.ijfa.20160501.08

 

Topics:

Financial Instrument Disclosure: Comparison of Indonesian and UK Banks

 

Methods:

In order to conduct an analysis about the level of compliance of public companies’ financial statement will be implemented through content analysis method. This research will focus on the PSAK which has significant impact to companies: PSAK relating to financial instrument (PSAK 60 Financial Instrument: Disclosure) which is based on IFRS 7 Financial Instrument: Disclosure. For each disclosure item obliged on the aforementioned PSAK and IFRS will be compared to Indonesian and UK banks’ 2014 financial statements.

 

Results:

In order to compare financial instrument disclosure of listed banks in Indonesia and UK, we have selected 5 banks in each country. We choose large banks to conduct the analysis because larger banks tend to have more complex financial instruments.

 

For several disclosure items required in the standard, UK banks also tend to disclose more information. For example, the standard stipulate the special disclosures about financial assets and financial liabilities designated to be measured at FVTPL. Indonesian  banks disclosure   is   limited   to   the qualitative aspect through “Summary of Accounting Policy” for quantitative information, it is required to consult to each note of financial assets and liabilities. On the other hand, UK banks‟ he disclosure is separated as stand-alone account in statement of financial position with the relatively extensive disclosure,   including:   basic   valuation,   adjustment,   risk related adjustment, model/method of measurement,   the disclosure and measurement is conducted based on the 3 level of input (including the reconciliation for the movement that includes the provision of credit risk effect), sensitivity analysis of the effect of changes in significant unobservable assumptions to reasonably possible alternatives (including the favourable and unfavourable effect of market risk), quantitative   information about   significant  unobservable inputs in Level 3 valuations.

 

Conclusion:

The comparison highlight several differences in disclosure in both countries, where UK banks tend to disclose more both comprehensive disclosure in their notes to the financial statements. The differences indicates that the disclosure is not fully comparable between banks in both countries, which in turn may limit the benefit of IFRS convergence.

 

The result has implications for regulators and standard setters. Regulators need to examine whether listed firms have fully comply with disclosure requirements in accounting financial standards. Standard setters and regulators should examine whether non compliance or limited disclosure may indicates that preparers may have obstacles in disclosing several required disclosure.