An Indonesian limited liability company, including a PT PMA, must have its annual financial statements audited when its total assets and/or annual business turnover reach IDR 50 billion (USD 2.8 million), unless another legal requirement already requires an audit. For a PT PMA, the threshold is based on its assets and business turnover, not its registered or paid-up capital.
How Is Annual Business Turnover Calculated?
Annual business turnover is the turnover generated from the company’s business activities during the financial year. It is not the same as cash collected from customers.
Operating expenses reduce profit but do not reduce turnover. A company with IDR 60 billion (USD 3.4 million) in annual business turnover can meet the audit threshold even if its profit is much lower.
Need to determine whether your company’s turnover triggers an audit? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to review the calculation
Revenue is recorded according to the accounting standards that apply to the company’s financial statements. This means revenue may be recorded at a different time from when the company issues an invoice or receives payment.
How Are Total Assets Calculated?
The asset test uses the total assets reported in the company’s financial statements. Depending on the business, these can include cash, receivables, inventory, property, equipment, and other recognized assets.
Accounting treatment can change the amount reported as total assets. Some spending is recorded as an asset rather than being treated entirely as an expense when it is incurred. Financial statements prepared under the applicable Indonesian accounting standards provide the figures used to determine the company’s total assets.
Does Paid-Up Capital Count Toward the Audit Threshold?
Paid-up capital is not part of the IDR 50 billion threshold. However, the assets created or received from that capital can increase the company’s total assets.
Assessing whether capital funding has moved your PT PMA above the asset threshold? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to review its financial position
If shareholders make a capital injection and the money remains in the company’s bank account, it forms part of total assets. If the company uses the money to buy equipment, that equipment can instead form part of its assets.
How Do Related-Party Transactions Affect the Threshold?
Transactions with an overseas parent or affiliate can affect the threshold when they create turnover or assets for the Indonesian company.
For example, revenue from services provided to an overseas affiliate can count toward annual business turnover. If the affiliate has not yet paid for those services, the unpaid amount can also be recorded as a receivable and form part of the Indonesian company’s total assets.
How Can a Company Trigger One Threshold but Not the Other?
Consider a foreign-owned company with IDR 35 billion (USD 2 million) in total assets and IDR 60 billion (USD 3.4 million) in annual business turnover. Its turnover exceeds IDR 50 billion, so its financial statements must be audited even though its assets remain below the threshold.
If your company is approaching either IDR 50 billion threshold, contact MAP Resources Indonesia at info@mapresourcesindonesia.com to determine whether an audit is required
The reverse can also happen. A company with IDR 55 billion (USD 3.1 million) in total assets and IDR 10 billion (USD 570,000) in annual business turnover must have its financial statements audited because its assets exceed the threshold.
A company can also be required to have an audit for other legal reasons even when both figures remain below IDR 50 billion.
Review Audit Thresholds with MAP Resources Indonesia
MAP Resources Indonesia can determine whether a company’s assets or annual business turnover require its financial statements to be audited in Indonesia. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to review your company’s audit position.
