ABSTRACT
The Indonesia Chartered Accountants (IAI) through the Indonesian Financial Accounting Standards Board (DSAK) issued SAK for Private Entities (SAK EP) as a replacement for SAK for Entities Without Public Accountability (SAK ETAP) in order to respond to the development of international financial reporting standards (International Financial Reporting Standards (IFRS) for SMEs) which refer to national conditions and needs. SAK EP is intended for entities that do not have public accountability and that publish Financial Statements (LK) for general purposes for external users. Entities that apply SAK EP for the first time, when preparing financial statements for the year period beginning on or after January 1, 2025, can follow the transitional provisions stipulated in SAK EP.
Financial Statements (LK) are a medium of communication about financial position and performance, as well as its changes. LK is an essential element for an entity. We discover that the dynamic world of business and social life creates significant differences in terms of complexity, goals, business area, and entity size. The more complex the entity’s business, the financial accounting standards (SAK) need to be used become more complicated and the resulting LK standard requirements are also higher. This requirement arises from internal and external users for the LK prepared by the management.
The SAK in Indonesia that will become effective on January 1, 2025 is the SAK for Private Entities. The purpose of the SAK for Private Entities issued is for use by entities that do not have public accountability and publish general-purpose financial statements for external users. Nonetheless, entities that have public accountability can use the SAK for Private Entities only if the regulatory authority allows the use of the SAK for Private Entities as the basis for preparing the LK.
Entities that choose the SAK for Private Entities must meet the following requirements:
- Lack of public accountability; or
- Have public accountability but are permitted by the authorized regulator to prepare financial statements in accordance with the SAK for Private Entities; or
- Meet the requirements to conduct financial reporting in accordance with SAK for Micro, Small, and Medium Enterprises (EMKMs), but choose to conduct financial reporting in accordance with SAK for Private Entities.
SAK for Private Entities aims to simplify financial reporting, maintain consistency in the measurement and presentation of financial information, and make it easier for private entities to fulfill their accounting obligations in a more efficient and practical way with accounting process that is more easier, efficient, and relevant for private entities. Thus, the SAK for Private Entities can be stated to be simpler than SAK because of the elimination of topics that are not relevant to private entities such as earnings per share, interim financial statements and operating segments.
SAK for Private Entities is an adoption of the International Financial Reporting Standards (IFRS) for SMEs by considering conditions in Indonesia. The SAK of Private Entities is compiled based on the topics stated in Chapters 1 to 35. Cross-references between chapters or other paragraphs only apply between chapters in the SAK of Private Entities. The ratification of the SAK of Private Entities was carried out by the Indonesian Financial Accounting Standards Board of the Institute of Indonesia Chartered Accountants (DSAK IAI) on June 30, 2021, which also replaced the SAK for Entities Without Public Accountability or SAK for ETAP.
The regulations that were previously not available in the SAK for ETAP are listed in the following aspects:
- Use of fair value for investment property and biological assets
- Use of the concept of other comprehensive income
- Consolidated financial statements
- Business combination and goodwill
- More detailed arrangements for financial assets and liabilities
- Deferred tax
At the time of the first adoption of the SAK for Private Entities, there are several required provisions. The first LK in accordance with the SAK for Private Entities is the first annual LK when an entity makes an explicit statement of compliance with the SAK for Private Entities. Retrospective presentation is required for the information on the comparative report presented, but the SAK for Private Entities also provides guidance on exception for retrospective presentation on certain accounts.
In one of the paragraphs of the chapter on transition provisions it is also mentioned that if it is impractical for an entity to make one or more of the required adjustments at the transition date, the entity applies such adjustments in the earliest period as practicable to do so, and identifies the amounts in the financial statements that have not yet been represented. If it is impractical for an entity to provide any disclosure required by the SAK for Private Entities, including for a comparative period, then it must be disclosed.
The accounting policies used by the entity at the time of adoption of the SAK for Private Entities may differ from those used by the entity on the same date based on previous financial reporting framework. The adjustments that arise are recognized directly in the retained earnings. Fair presentation of LK requires an honest presentation of the impact of transactions, events, and other conditions in accordance with the definition and criteria for recognition of assets, liabilities, income, and expenses regulated in Chapter 2 Concept and Pervasive Principles.
The SAK for Private Entities was prepared with the hope that the private entities in Indonesia can continue to comply with regulations and provide LK with higher quality (clearer and more transparent) according to the characteristics of each entity, as well as simplify accounting procedures, have higher access to financing, and facilitate global interaction at lower costs so as to encourage transparency, efficiency, and economic growth for the private sector in Indonesia.
The SAK for Private Entities are equipped with examples of illustrative financial statements. These and other examples presented in the Chapter of SAK for Private Entities are examples adopted from the 2015 version of IFRS for SMEs, which was effective January 1, 2017. The application of examples in the SAK of Private Entities needs to pay attention to conformity with accounting practices in Indonesia.
One of the advantages of SAK for Private Entities compared to SAK for ETAP and SAK for EMKM is that LK prepared on the basis of SAK for Private Entities can be compared with other private entities or Small and Medium Enterprises (SMEs) abroad. The LK prepared based on the SAK for Private Entities is more understandable for creditors and investors of multinational companies compared to SAK for ETAP which is no longer valid and the SAK for EMKM.
