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Indonesia’s Financial Reporting Framework Gets a Boost: New Amendments Set to Change Accounting Landscape

Jakarta, Indonesia

In a move aimed at enhancing transparency and consistency in financial reporting, the Indonesian Institute of Accountants (DSAK IAI) has announced a series of amendments to various accounting standards. The changes are set to take effect starting from January 2023 for annual reporting periods.

Key Amendments

  • PSAK 16: Prohibition on offsetting costs against revenue generated prior to asset completion
    • Entities will no longer be able to deduct proceeds from selling items produced before an asset is available for use.
    • Sales proceeds and related costs must be recognized in profit or loss instead.
  • PSAK 1: Clarification of liability classification as current or non-current
    • Liability classification is based on rights existing at the end of the reporting period, regardless of an entity’s expectations about exercising those rights.
    • Definition of “settlement” introduced to clarify transfer of cash, equity instruments, or other assets in exchange for a liability.
  • PSAK 25: Update to definition of “accounting estimates”
    • Accounting estimates are now defined as monetary amounts subject to measurement uncertainty.
    • Revised standard aims to provide clarity on the distinction between accounting policies and accounting estimates.
  • PSAK 46: Clarification of recognition of deferred taxes related to assets and liabilities arising from single transactions
    • Entities will no longer be able to apply an initial recognition exemption for offsetting temporary differences, which requires recognition of deferred tax assets and liabilities.

Key Considerations for Businesses

When implementing these amendments, businesses should:

  • Review existing accounting policies to ensure alignment with revised standards.
  • Apply judgment when determining whether a particular accounting policy is material.
  • Identify accurately whether changes in accounting estimates or accounting policies have occurred.
  • Ensure accurate classification of liabilities as current or non-current.

Supporting Resources

For more information on these amendments, please refer to the IFRS in Focus Newsletter. The DSAK IAI has also provided guidance and examples to support the implementation of these changes.

Timeline

The amendments are effective for annual reporting periods beginning on or after January 1, 2023. Businesses are encouraged to begin implementing the revised standards as soon as possible to ensure a smooth transition.