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Financial Record-Keeping Requirements in Indonesia: A Guide for Businesses

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Indonesia’s Financial Accounting Standards (SAK) serve as the guiding principles for accounting practices in the country. These standards are set by the Financial Accounting Standards Board (DSAK IAI) and the Indonesian Sharia Accounting Standards Board (DSAS IAI), ensuring that businesses operating in Indonesia conform to specific policies and principles.

Audits and Convergence with International Financial Reporting Standards

For all public and private companies in Indonesia, audits are based on the accounting standards laid out by DSAK-IAI and DSAS-IAI. Since 2015, the DSAK IAI has converged its accounting standards with those of the International Financial Reporting Standards (IFRS), issued by the IFRS Foundation and the International Accounting Standards Board (IASB).

Financial Accounting Standards

Indonesia’s financial accounting standards are divided into four tiers:

  • Tier 1 SAK: Applies to listed companies and other entities with significant public accountability, fully converging with IFRS in 2015.
  • Tier 2 SAK EP: For private entities that do not have public accountability.
  • Tier 3 PSAK Syariah: For companies that follow Sharia principles for transactions.
  • Tier 4 PSAK EMKM: For micro, small, and medium enterprises.

Bookkeeping Requirements

In Indonesia, it is mandatory for every company operating in the country to maintain their bookkeeping locally. This involves several key aspects:

  • Preparation of financial statements
  • Maintenance of accounting records and supporting documents
  • Document retention

Companies must keep thorough and organized records of their financial transactions, retaining all relevant records and documents, including:

  • Sales invoices
  • Vendor invoices
  • Bank statements
  • Agreements
  • Contracts
  • Tax documents

All these records and documents must be securely preserved for 10 years, and the financial statements for each year must include comparative figures from the previous years for comparison and analysis.

Fiscal Year and Language

The annual deadline for reporting and paying corporate income tax is April 30, unless a company’s fiscal year begins from January 1 to December 31, in which case the deadline is four months after the end of its fiscal year. All accounting records must be in Bahasa Indonesian, and financial books should be maintained in Rupiah. However, certain entities can maintain their books in USD and use English for documentation with approval from the Director General of Taxes.

Conclusion

For foreign companies operating in Indonesia, it is recommended that they contact local taxation and accounting professionals to ensure compliance with Indonesian financial record-keeping requirements. By following these guidelines, businesses can maintain accurate financial records, ensure transparency and accountability, and comply with local regulations.