Accounting Standards and General Audit Requirements in Indonesia

Date of Post

December 21, 2022

Written by

lemonadecares

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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