Indonesia Accounting Standards

Foreign-owned businesses operating in Indonesia generally prepare statutory financial statements under Indonesian Financial Accounting Standards (SAK), but since 1 January 2025, "SAK" is no longer a single framework. Most foreign-owned PT PMAs now report under SAK EP, a tier converged with IFRS for SMEs rather than full IFRS, which creates a built-in gap between local statutory figures and the group accounts many businesses must still deliver to overseas shareholders, lenders, and regional headquarters.

Contributing Advisor

Duha Ziaun

Senior Associate, Corporate Accounting Services

At the same time, Indonesia's tax administration has moved to a fully clearance-based Coretax system, and a statutory audit obligation applies once a company crosses an IDR 50 billion asset or turnover threshold. None of this needs to be a surprise midway through the investment, but it does need to be planned for from the point of incorporation onward. This guide sets out what foreign investors should know about Indonesian accounting requirements, where they intersect with group reporting obligations, and where the practical risk actually sits.

What is the current state of Indonesia’s accounting framework?

Does your SAK EP reporting align with your overseas parent's IFRS accounts?

This is the section with the most news value, and it's worth sitting with. SAK EP is not "Indonesian IFRS" in the way many investors assume, it's IFRS for SMEs (the 2015 version) adapted for Indonesian conditions, applied to entities without public accountability. That's a materially simpler standard than the full IFRS Accounting Standards a European, UK, or US parent company almost certainly reports under.

The gap shows up in concrete places: SAK EP's treatment of financial instruments, leases, and revenue recognition is less granular than full IFRS, and a group consolidation team receiving SAK EP-based figures from an Indonesian subsidiary will typically need to make adjusting entries to bring them into line with group policy, not just translate currency.

There's a second, less-known development worth flagging for anyone planning group reporting architecture. From 1 January 2027, a new standard, PSAK 119 (based on IFRS 19), becomes available specifically for subsidiaries without public accountability whose parent already produces IFRS-consistent consolidated accounts. Rather than switching to SAK EP, an eligible subsidiary can apply full recognition and measurement rules, the same rules the parent uses, while claiming a reduced disclosure footprint.

For a foreign-owned entity whose overseas parent already reports under full IFRS, this could turn out to be a cleaner fit than SAK EP once it takes effect, since it removes the recognition-and-measurement gap entirely and only trims disclosure.

It's a decision worth revisiting closer to 2027 rather than assuming SAK EP is the only private-entity option indefinitely.

What is the practical difference between SAK EP and full IFRS?

SAK EP uses simplified recognition and measurement in several areas where full IFRS (and the general SAK/IFRS-converged track) is more detailed , most visibly around financial instrument classification and impairment. In practice, this means an Indonesian subsidiary's SAK EP-based profit, asset values, or lease liabilities won't automatically match what the same transactions would show under the parent's full IFRS policies, so group consolidation almost always needs a bridging step rather than a straight roll-up.

When do Indonesian financial statements trigger a requirement?

All Indonesian entities keep accounting records under SAK, in Rupiah and Bahasa Indonesia by default, and retain that documentation for a minimum of 10 years. The audit question is more specific than "certain circumstances”, a statutory audit by a registered public accountant is required once a company's total assets or annual turnover reach IDR 50 billion, regardless of foreign or domestic ownership, and separately for any company collecting public funds, issuing debt or equity securities to the public, or otherwise publicly listed. For most PT PMAs, the IDR 50 billion asset-or-turnover test is the one that applies.

Indonesian commercial banks increasingly expect audited or independently certified statements before extending credit facilities or processing larger foreign-currency transactions, and BKPM may request audited figures during investment realization checks, meaning audit-ready bookkeeping from the outset is usually cheaper than a rushed first-time audit once a bank or regulator asks for one.

On currency and language: PT PMAs, subsidiaries of foreign companies, and certain other qualifying taxpayers can apply to the DGT for approval to keep books in US dollars and English rather than Rupiah and Bahasa Indonesia. The application needs to go in at least three months before the relevant fiscal year begins and is treated as approved if the DGT doesn't respond within the statutory period, which makes it a timing decision to build into incorporation planning, not something to request after the first financial year has already started. DSA's existing guide to Indonesian financial compliance covers the audit and bookkeeping mechanics in more detail.

Do you need an audit below the IDR 50 billion threshold?

Not as a legal obligation, but "not required" and "never asked for" aren't the same thing. Lenders, investors, and BKPM in practice treat audited or certified statements as a proxy for reliability well before a company hits the statutory size, so many PT PMAs commission a voluntary audit or at least a compilation review earlier than the law strictly demands.

What goes wrong when accounting is not set up before you incorporate?

Indonesian accounting and tax obligations start functioning from the point of incorporation, not the point of first revenue, and sequencing matters more than most foreign investors expect. A company that registers its NPWP (tax ID) and PKP (VAT-registered) status without first mapping how its Coretax profile, chart of accounts, and invoicing workflow will actually operate typically discovers the gap the hard way: an early supplier or customer invoice gets issued outside the correct Coretax workflow, fails clearance, or is coded against the wrong VAT status, and the fix consumes far more time retroactively than setting the sequence up correctly would have taken at incorporation.

Getting the accounting system, PKP registration, and Coretax profile aligned before the first transaction is a small upfront step that avoids a disproportionately larger cleanup later.

How does Coretax change what your accounting records need to support?

Coretax is no longer a platform mentioned in passing, it is now the precondition for a VAT invoice to be legally valid. Since full enforcement took effect on 31 December 2025, DJP clearance of an invoice happens in real time and before that invoice counts for VAT purposes, replacing the older e-Faktur model where invoicing and validation were more separable steps.

The 2025 annual CIT return, with a statutory deadline of 30 April 2026, was the first full filing cycle run entirely through Coretax, and the transition wasn't frictionless: the Directorate General of Taxes issued KEP-71/PJ/2026 that same day, waiving administrative sanctions for corporate taxpayers who filed or paid late, provided they did so within one month of the deadline, in direct response to system-driven delays during the changeover.

What this means for a foreign investor's accounting function is practical, not theoretical: your bookkeeping now needs to support real-time invoice clearance, not just end-of-period reconciliation, because a data mismatch, an incorrect NPWP, a misclassified transaction type, can block clearance and, with it, a counterparty's ability to claim input VAT. That's as much a commercial and relationship issue with suppliers and customers as it is a compliance one.

What happens if an invoice fails Coretax clearance?

An invoice that fails clearance is not valid for VAT purposes until it's corrected and resubmitted , which means the seller can't treat it as issued, and the buyer can't credit the input VAT against it, until clearance succeeds. For a business running monthly VAT filings on tight timelines, an accumulation of failed or delayed clearances is less a paperwork nuisance than a cash-flow and counterparty-trust problem.

Managing monthly VAT, withholding tax, and Coretax filings in-house? Speak with our tax compliance team about outsourcing the process end-to-end. Learn more →

Is there a new compliance layer to track?

Alongside the accounting and tax changes above, Indonesia's Ministry of Law has separately tightened corporate reporting through Permenkum No. 49/2025, effective 17 December 2025, which replaces the previous 2021 regulation on company establishment, amendment, and dissolution. Two changes are relevant to accounting teams specifically: beneficial ownership documentation is now a required part of incorporation and amendment filings, and the company's Annual Report, previously an internal shareholder document, must now be formally approved at a shareholders' meeting (recorded in a notarial deed) and filed electronically through the SABH system, with the Ministry able to block a company's system access if it fails to comply after a formal written warning. This is a legal-administrative obligation rather than an accounting standard, but it runs on the same annual cycle as your financial statements, which is exactly why it's easy for an accounting or finance function to miss if ownership of the two calendars sits in different teams.

Whether you're setting up your accounting function ahead of incorporation or reviewing an existing structure against these 2025–2026 changes, Dezan Shira and Associates can help you get it right from the start. Contact our Indonesia team to discuss your accounting and compliance needs.