Accounting Standards and General Audit Requirements in Indonesia

Date of Post

December 21, 2022

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The accounting standards in Indonesia is Indonesia Financial Accounting Standards (Pernyataan Standar Akuntansi Keuangan – PSAK) issued by Indonesia Financial Accounting Standard Board (Dewan Standar Akuntansi Keuangan – DSAK) and the Indonesia Sharia Accounting Standards Board (Dewan Standar Akuntansi Syariah – DSAS) which are under the Indonesian Institute of Chartered Accountants (Ikatan Akuntan Indonesia – IAI).

DSAK-IAI has the authority to set PSAK and to approve interpretations of those standards. PSAK are intended to be applied by profit-orientated entities. These entities’ financial statements give information about performance, position and cash flow that is useful to a range of users in making financial decisions. These users include shareholders, creditors, employees and the general public. 

A complete set of financial statements includes a:

  • statement of financial position; 
  • statement of comprehensive income; 
  • statement of cash flows; 
  • a description of accounting policies; 
  • notes to the financial statements; and
  • statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements.

There are four tiers of accounting principles in Indonesia:

  • Tier 1 – PSAK based IFRS is for domestic and foreign listed companies, and companies with public accountability. Effective on 1 January 2015, the Indonesia Financial Accounting Standard (SAK) has fully converged with the International Financial Reporting Standard (IFRS) as of 1 January 2014. The board commits to maintain a one-year gap. As a result, PSAK based IFRS will continually change following the IFRS updates.
  • Tier 2 – PSAK Syariah is for companies which conduct their transactions using the Syariah principle, such as Bank Syariah and other Syariah Financial Institutions.
  • Tier 3 – PSAK-ETAP is for entities without public accountability or entities with insignificant public accountability. The purpose of this standard is to provide convenience in presenting their financial statements.
  • Tier 4 – PSAK EMKM is for micro, small and medium enterprise.
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Companies need to be audited by a public accountant registered in Indonesia if they meet one of the following requirements:

  • Companies that have total assets exceeding IDR 25 billion
  • Companies with annual gross turn over exceeding IDR 50 billion per year
  • Companies that issue debt acknowledgement instruments
  • Companies that are state-owned enterprises
  • Companies in the business sector that are related to the mobilisation of the public fund.
  • Publicly traded companies

Audits of Indonesian companies are based on the Indonesian Financial Accounting Standards (Standar Akuntansi Keuangan – SAK) which is determined by the DSAK-IAI and DSAS-IAI for sharia-based companies.

In practice, a company with audited financial statements would be more convincing to the local tax office when it comes to annual corporate income tax return submission.


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