Abstract
PSAK 69 Agriculture regulates the accounting treatment of agricultural activities in Indonesia. The measurement of biological assets is the most important part of the arrangement of PSAK 69. PSAK 69 deals with biological assets measured at fair value less costs to sell at the beginning and end of the reporting period. Characteristics of growing biological assets will have an impact on the growth in fair value of assets, so there will be differences in fair value at the beginning and end of the financial reporting period. The difference in fair value of biological assets, whether realized or not, is recognized as gain in the current period. This will have an impact on the quality of the company's earnings. This study aims to examine differences in earnings quality before and after the implementation of PSAK 69 in agricultural sector companies listed on the Indonesia Stock Exchange. The research was conducted on 14 agricultural companies listed on the Indonesia Stock Exchange in the 2016-2019 observation period. Earnings quality is measured by the earnings response coefficient. Earnings response coefficients are estimated using the firm specific coefficient model (FSCM) and pooled cross-sectional regression model (CSRM) methods. This study measures the quality of earnings before and after the application of PSAK 69. The quality of earnings before and after the application of PSAK 69 is tested by a paired two-sample t-test. The results of this study found no difference in earnings quality before and after the application of PSAK 69.
Highlights
All efforts are made by accounting standards setting organizations, including the Financial Accounting Standards Board, to improve the quality of financial reports, especially profits
Note: CARit = β0 + β1 UEi,t + β2 PSAK69 × UEi,t +β3 PSAK69i,t +εit where, CARit = Company i abnormal return caused by the earnings announcement event, UEit = unexpected earnings for company i on earnings announcement, PSAK69 = dummy variable (1 if the company applies PSAK 69, 0 if the company has not implemented PSAK 69)
The significance value of 0.581 is smaller than 0.05, so the results of the analysis prove that there is no significant difference between the ERC before and after the application of PSAK 69
Summary
All efforts are made by accounting standards setting organizations, including the Financial Accounting Standards Board, to improve the quality of financial reports, especially profits. The application of fair value in measuring agricultural activity assets is expected to improve the quality of financial information presented in financial reports, including earnings quality. This study will examine the impact of the application of PSAK 69 on the quality of earnings of companies listed on the Indonesia Stock Exchange engaged in the agricultural sector. The study of the application of accounting treatment in the agricultural sector, namely International Accounting Standard (IAS) 41 in countries other than Indonesia was conducted by several researchers Feleagă, Feleagă, & Răileanu (2012), Huffman AA (2013), Silva, Nardi, & Ribeiro (2015), Fischer & Marsh (2013), and Argile's & Slof (2001). This study is different from previous empirical research that examined the impact of applying IAS 41 on value relevance (Huffman A., 2014; Huffman A., 2013), and earnings management (Silva, Nardi, & Ribeiro, 2015)
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