International Financial Reporting Standard (IFRS) adoption in Indonesia.


In 2012, the G20 leaders declared their support to working towards the convergence of a single set of high quality accounting standards. The need for a global standard is due to the fact that:

  • Modern economies rely on cross border transactions. More than a third of all financial transactions occurs across border and this number is expected to grow.
  • Investors seek an investment opportunities across the globe which involves international transactions and operation.

The International Financial Reporting Standard (IFRS), issued by International Accounting Standard Board (IASB), provides a set of common rules so that financial statement can be consistent, transparent and comparable around the world. As of 2018 , IFRS has been used at least in 140 jurisdiction around the world, including those in European Union (EU) and many in Asia and South America , but the United States of America uses Generally Accepted Accounting Principles (US GAAP).

Indonesian Financial Accounting Standard (PSAK) convergence to IFRS

The Financial Reporting environment In Indonesia has experienced significant and unprecedented changes due to the commitment of the Indonesian Financial Accounting Standard Board (DSAK) to fully adopt IFRS. The decision was made in 2008 and the approach that was taken was a gradual transition approach rather than a big bang approach. The reason for this is mainly to be able to address the interpretation and implementation issues.

The first phase of the IFRS convergence project has now completed, and the Indonesian Financial Accounting Standard (PSAK) as per 1 January 2012 has been substantially in line with IFRS as per 1 January 2009. In other words, there is a 3 years gap between PSAK and IFRS.

The Indonesian Financial Accounting Standard Board (DSAK) is currently progressing with the second phase of IFRS convergence with the objective of minimizing the gap between PSAK and IFRS from 3 years to 1 year. As a result, PSAK has been changing continually for the past 3 years and will be continue in the years to come.

Managing the changes

This changes on the PSAK has created new challenge for businesses, not only on how to maintain compliance with the standard but also, the adjustments to the accounting information system, the impact to expected earnings and financial ratios, adequacy of knowledgeable resources and linkage to the taxation.

The following are some practical guidance to anticipate or minimize the impact:

  • Spend time to familiarize and understand the new standard and obtain training if needed.
  • Take inventory all critical documents needed to conduct the analysis
  • Learn from “Practical Expedients” provided by the standard
  • Develop key controls surrounding the implementation process
  • Look for published guidance from the big public accounting firm or contact us.

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Acclime Indonesia helps established multinational companies and startups start and operate their business in Indonesia. By seamlessly navigating our clients through the complexities of the Indonesian laws and bureaucracy, we allow them to reclaim valuable time and fully focus on growing and developing their business.

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