Companies in Indonesia generally prepare their annual financial statements in accordance with the applicable Indonesian Financial Accounting Standards. For foreign-owned companies, the year-end process requires the accounts to be closed and adjusted before the financial statements are finalized.
What Financial Statements Must Be Prepared Under PSAK?
A complete set of financial statements generally includes:
- Statement of financial position
- Statement of profit or loss and other comprehensive income
- Statement of changes in equity
- Statement of cash flows
- Notes to the financial statements
The financial statements also include comparative information for the preceding period, as required under the applicable PSAK.
The applicable Indonesian Financial Accounting Standards set the rules for recording and presenting transactions in the financial statements.
The notes provide information on accounting policies, significant judgments, estimates, related-party transactions, commitments, and other matters that cannot be understood from the primary statements alone.
Close and Reconcile the Accounts Before Preparing the Statements
Before preparing the year-end financial statements, the company should complete its accounting close and reconcile significant balances.
This can include reconciling bank accounts, receivables, payables, inventory, fixed assets, payroll, taxes, shareholder balances, and intercompany transactions.
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Transactions must also be recorded in the correct reporting period. Revenue, expenses, accruals, and liabilities that relate to the financial year should not be shifted into another period simply because an invoice or payment was processed later.
Companies holding inventory should reconcile accounting records with year-end inventory counts. Fixed-asset registers should also agree with the general ledger and reflect additions, disposals, depreciation, and other adjustments during the year.
Review the Main PSAK Year-End Adjustments
Closing the ledger does not necessarily mean the financial statements are ready. Companies may need to record adjustments required under the applicable accounting standards.
Foreign-currency balances may need to be converted using the appropriate year-end exchange rate. Companies may also need to assess whether receivables and other financial assets have lost value, including by calculating expected credit losses where required.
Companies should also review leases, employee benefit obligations, provisions, asset impairment, deferred tax, and events occurring after the reporting date.
Reconcile PSAK Accounts With Indonesian Tax
Accounting profit under PSAK does not automatically equal taxable income. Differences can arise from depreciation, provisions, employee expenses, benefits in kind, entertainment expenses, foreign exchange treatment, related-party transactions, and other items treated differently for tax purposes.
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The company must adjust its accounting profit for these tax differences when calculating taxable income for its annual corporate income tax return.
Temporary differences between the accounting and tax treatment of assets and liabilities can also create deferred tax assets or liabilities in the financial statements.
Year-end balances should also be reconciled with relevant tax records, including VAT and withholding taxes.
Check Whether the Financial Statements Require an Audit
Being a foreign-owned company does not by itself mean that the financial statements must undergo a statutory audit.
Indonesia’s financial audit requirements apply to specified companies, including public companies, state-owned Persero companies, companies that collect or manage public funds, companies that issue debt instruments to the public, and companies with assets and/or annual turnover of at least IDR 50 billion (USD 3 million). Other companies may also be required to undergo an audit under sector-specific regulations.
Approve the Annual Financial Statements and Meet the Relevant Deadlines
Year-end financial reporting and tax filing have separate deadlines.
Under Indonesia’s company framework, the annual report is generally submitted to the annual General Meeting of Shareholders within six months after the end of the financial year. Where the company is required to have its financial statements audited, the audited financial statements form part of the annual reporting process.
A corporate taxpayer generally files its annual income tax return within four months after the end of the tax year. For a company using a calendar financial year, this normally means April 30. The filing period can be extended by up to two months if the taxpayer follows the applicable extension procedure.
Prepare Group Reporting for Foreign-Owned Companies
A PT PMA may need to prepare both Indonesian statutory financial statements and reporting packages for its overseas parent company.
MAP Resources Indonesia can support your year-end close, PSAK reporting, and group reporting requirements. Email info@mapresourcesindonesia.com
The group reporting package may use different account classifications, reporting formats, or accounting policies. Where the parent reports under IFRS or another accounting framework, differences from the Indonesian company’s applicable accounting standards may also need to be identified.
Differences in intercompany loans, service fees, royalties, purchases, sales, or other related-party transactions can create differences when the parent company consolidates the group’s accounts.
Prepare Year-End Financial Statements With MAP Resources Indonesia
MAP Resources Indonesia assists foreign-owned companies with year-end accounting, PSAK financial statements, tax reconciliation, audit preparation, and group reporting. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
