Understanding financial statements in Indonesia.

Understanding financial statements in Indonesia

Financial statements are important documents that companies must prepare. If you are a new investor, it is crucial you understand the financial statements and when to submit them. We have put together a guide to understanding financial statements in Indonesia.

Let’s start.

What are financial statements?

Financial statements are reports about the company’s financial status for a period of 12 months, which includes the company’s assets and liabilities, profit or losses, and statements of changes of equity.

The financial statements must be approved by the general meeting of shareholders or other relevant authorities.

Which companies must prepare audited financial statements?

Companies that are required to prepare audited financial statements are as follows:

  • Limited liability companies that meet one of the following conditions:
    • Public listed companies
    • Companies with business activities related to public fund management, such as financial institutions (bank, insurance company, pension fund and investment manager)
    • Companies that have an issued statement of debt recognition
    • Companies with total assets exceeding IDR 25 billion
    • Companies with annual gross turnover exceeding IDR 50 billion
    • Debtors whose annual financial reports are required by the bank to be audited as loan covenant
  • State-owned company (BUMN / BUMD)

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Five core elements of financial statements

Financial statements consist of five main elements:

  1. Balance sheet
  2. Profit and loss statement
  3. Cash flow statement
  4. Statement of changes in company equity
  5. Notes to the financial statement

Element 1: Balance sheet

The balance sheet contains all the information concerning the company’s assets, liabilities and equity at the end of the financial year.

Element 2: Profit and loss statement

The profit and loss statement shows the company’s income, expenses, profits or losses during the year.

Element 3: Cash flow statement

The cash flow statement reports how the company produced and used the cash within the financial year.

The cash flow statement divided the use of cash into three groups:

  • Operations
  • Investing
  • Financing

Element 4: Statement of changes in company equity

The statement of changes in company equity reports on any changes or transactions in the equity of the company.

Examples of transactions include dividends, the owner’s investments and mergers.

Element 5: Notes to the financial statements

The notes to the financial statements t is a detailed description of the above statements.

Benefits of the financial statements

The financial statements provide an overview of how and why the company capital has been used, the results of the operations and the current financial position.

The information included in the financial statements can be used to make decisions for the company’s direction and prepare or allocate budgets by referring to past financial statements.

When to submit the annual financial statements?

The annual financial statements will be used to calculate the annual corporate income tax return (CITR), which should be submitted within four months after the end of the financial year.

What are consolidated financial statements?

Consolidated financial statements are necessary if you have a subsidiary company. It combines the parent company’s and the subsidiary’s financial statements together.

The consolidated financial statements must be prepared in accordance with the Indonesia Financial Accounting Standards (PSAK).

Parent companies are exempted from preparing consolidated financial statements if:

  • The parent company is a wholly-owned subsidiary
  • The parent company is a partially owned subsidiary
  • Objections are not made to the parent company presenting their financial statements

Conclusion

Accounting is necessary for every company, and it is crucial that you keep organised and accurate financial statements in order to determine any future trends. We recommend engaging with Acclime’s professional accounting team.

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