Business

Accounting & Reporting

Overview of Accounting Practice and Environment

The history of Indonesian Generally Accepted Accounting Principles began when the Indonesia Accountants Association (abbreviated to IAI), established in 1957, was appointed by the Government of Indonesian in 1984 to develop accounting standards in Indonesia to be used mostly for Limited Liability Partnership.

IAI the established a committe to develop accounting standards in Indonesia. This commite, which is responsible for developing and implementing the accounting standars, is called Dewan Standar Akuntansi Keuangan (DSAK).

Over the years. IAI has developed many accounting standards for various type of business practices in Indonesia in October 2004, DSAK developed indonesian Generally Accepied Accounting Principles that consist of Accounting Methods and Procedures for Financial Statements, Accounting Method and Procedures for Financial Statement of Islamic Banking, 59 Statements of Financial Accounting Standars, and seven interpretations.

The Indonesia Statement of Financial Accounting Standards is mostly based on the international Accounting Standards (IAS), which was recently changed to Internation Financial Reporting Standars (IFRS). The second major source of The Indonesia Statament of Financial Accounting Standards is the United States Generally Accepted Acoounting Principles. In addition to the above two sources,

IAI also pronounces their own Statement Financial Accounting Standards such as Accounting Standard for Indonesian Venture Capital, Accounting Standard for Mining Industry, and Accounting Standard for Islamic Banking.

The 59 Statements of Financial Accounting Standards consist of 43 General Statements, 15 statements for specific industries and one statement revised and merged with other General Statements.

Other than IAI, the Goverment of Indonesia also appointed BAPEPAM (Indonesian Securities Exchange Commission) to establish additional regulation, besides these established by IAI, designed specifically for publicly hold corporations.

Presentation of Financial Statements

In compliance with government regulation, every limited liability partnership in Indonesia should prepare its Financial Statements in accordance with teh Financial Accounting Standards Esiablished by the Indonesia Accountants Association.

The Indonesian Financial Accounting Standards require that Financial Statements consist of an Income statement, Blance Sheet, Statement of Equity, and a Note to the Financial Statement.

With the Exception of the Cash Flow Statements, Financial Statements must be prepared basen on the accrual basis, and on the assemption that the company will remain in operation for the foreseeable future.

Financial Statements should be prepared annually and audited by a registered public accounting firm if the company meets any one of the following criteria:

• The company is ntilising public funds
• The company has issued obligation
• The company is publicly held corporation

The Audited Financial Statements of a company that meets one of the criteria above should the be verified and signed by the Board of Directors, and published in the local Indonesia newspaper.

Moreover, in Minister of Trade and Commerce requires the filling of the audited financial statements for every limited liability partnership that meets the following criteria:

• The entity is a publicly hold corporation
• The entity is utilising public funds
• The entity is has issued obligation or promissory note
• The entity is has total assets exceeding IDR 50.000.000