Other BriefingsIndonesian Accounting Standards vs IFRS: Choosing the Right Framework for Foreign-Owned Companies
Foreign investors operating in Indonesia are required to maintain their financial statements under the Indonesian Financial Accounting Standards (SAK), developed by the Indonesian Financial Accounting Standards Board (DSAK-IAI) and overseen by the Ministry of Finance. SAK functions as Indonesia’s equivalent to IFRS but incorporates adjustments for domestic taxation, reporting language, and currency policy. All statutory filings must be in Rupiah and in the Indonesian language and are submitted to both the Directorate General of Taxes (DGT) and the Ministry of Law and Human Rights.
SAK comprises two frameworks: full SAK, mandatory for all foreign-owned companies (PT PMAs), and SAK-ETAP, applicable only to smaller local enterprises. Compliance with SAK ensures that financial statements are accepted for audit, tax assessment, and profit repatriation purposes.
Because IFRS-only reports are not recognized by Indonesian authorities, foreign investors must base their accounting on SAK even when group reporting is done under IFRS.
Convergence and key differences between SAK and IFRS
Indonesia follows an IFRS convergence model, meaning it integrates IFRS principles after national review and adaptation rather than adopting them verbatim. The standards typically lag IFRS by about one to two years. Major international rules such as IFRS 9 (Financial Instruments), IFRS 15 (Revenue Recognition), and IFRS 16 (Leases) have been incorporated into SAK, though local interpretations align them with Indonesian disclosure and tax requirements.
This convergence creates differences in measurement and presentation. SAK retains historical cost as the primary valuation basis, whereas IFRS favors fair-value accounting. SAK mandates Rupiah as the functional currency, while IFRS allows companies to select a currency that best reflects operational cash flows. IFRS also requires broader risk and segment disclosures than SAK.
These differences can alter asset valuation, profit timing, and equity presentation, producing disparities that must be reconciled before consolidation into parent-company accounts.
Compliance, tax, and audit implications
For taxation and statutory audit, SAK is the only valid framework recognized in Indonesia. The DGT calculates taxable income from SAK-based ledgers, and any fair-value or timing variance between IFRS and SAK can create deferred tax assets or liabilities. Companies that fail to maintain SAK-compliant records risk rejected filings, inaccurate tax positions, and delayed repatriation of dividends.
Audits must be performed by firms registered with the Financial Services Authority (OJK), following SAK. However, multinational groups often require supplementary IFRS reconciliation reports to align subsidiary data with global financial statements. A well-designed accounting system that maps SAK to IFRS classifications allows the same transactional data to satisfy both statutory and group-level requirements, reducing audit adjustments and improving transparency.
Strategic framework for foreign-owned companies
Foreign-owned companies must determine the most efficient reporting architecture for balancing Indonesian compliance with global consolidation needs. Most PT PMAs adopt a SAK-first, IFRS-reconciled model: transactions are recorded under SAK throughout the year, and IFRS conversion schedules are prepared quarterly or annually for parent reporting. This approach minimizes administrative overhead while ensuring full regulatory acceptance.
Parallel SAK and IFRS ledgers become appropriate when the company is subject to OJK supervision, involved in cross-border financing, or reporting to investors that require IFRS statements in real time. In such cases, a unified chart of accounts mapped across both frameworks ensures consistency between local filings and global reports.
By establishing this integrated structure early, CFOs and controllers can manage statutory, tax, and investor obligations simultaneously and avoid future disruptions as Indonesia’s standards continue to converge with IFRS.
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