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All Journal The Indonesian Journal of Accounting Research
Azmi, Achmad Faizal
Universitas Gadjah Mada
Economics, Econometrics & Finance

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Fixed Assets Revaluation and Future Firm Performance: Empirical Evidence from Indonesia Achmad Faizal Azmi; Syaiful Ali
The Indonesian Journal of Accounting Research Vol 22, No 3 (2019): IJAR September 2019
Publisher : The Indonesian Journal of Accounting Research

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (834.442 KB) | DOI: 10.33312/ijar.454

Abstract

Indonesia's government issued a temporary tax cut law in 2015, which serves as a tax incentive that encourages Indonesian firms to revalue their fixed assets and disclose them in the financial statements according to the assets' fair value. We investigate the association between the revaluation of fixed assets and future firm performance for Indonesian firms. The result shows that the revaluation of fixed assets by Indonesian firms is significantly positively associated with changes in operating income one year after revaluation. Meanwhile, there is no positive association between the revaluation of fixed assets and operating cash flow after two years of revaluation. This result implied that the motivation of revaluation is mainly related to the effort to disclose the fair value of the fixed assets to the user of financial statements. We can conclude that the temporary tax cut law is effective in fostering the future operating performance of the Indonesian firms. 
Co-Authors Syaiful Ali