Expected Credit Loss Based on PSAK 71: A Systematic Literature Review

Abstract

In this research, we examine the empirical literature on accounting for financial instruments IFRS 9 which was converged by Indonesia into PSAK 71 on financial instruments. We focus on three things, namely transition, impairment, and parameters in calculating expected credit loss (ECL). This research uses literature study method. This study aims to discuss the implementation of IFRS 9 or PSAK 71 on financial instruments in Indonesia from various literatures. We conclude that the ECL provisions affect on how financial instruments are valued and how the income statement affects the value of shares. In good economic conditions, the impact of impairment on profit or loss should be less than when it is not, when there is a need to determine the lifetime ECL of a financial instrument rather of only a 12-month ECL due to high credit risk.

Keywords: IFRS 9; PSAK 71; Expected Credit Loss