ADOPTION OF IFRS: IS IT MANDATORY IN INDONESIA?
The adoption of IFRS was actually one of several important issues agreed upon among G-20
Country Leaders during London Summit in
2008, where Indonesia is
one of the G-20 Countries. In
order to strengthen Financial Supervision and Regulation, the G-20 Leaders
called on accounting standard setter to work urgently with supervisors and
regulators to improve standards and provisioning and achieve a single set
high-quality global accounting standards. Following this, the Financial Accounting Standards
Board of Indonesian Institute of
Accountants (DSAK-IAI) in cooperation with the International Accounting Standards Board (IASB) has initiated a convergence program
to adopt International
Financial Reporting Standards (IFRS)
into Indonesian accounting standards.
Thus, for the fiscal year beginning at January 1, 2012, the entire Indonesian accounting standards
(“PSAK”) are fully adopting IFRS.
WHAT SORT OF IMPORTANT CHANGES INTRODUCED IN IFRS?
·
Shifting from Rule-Based Standard to Principle-Based
Standard
In the newly revised PSAK’s that have already
adopted IFRS, there
will be no longer specific PSAK designed for a specialized industry. By
its Principle-Based nature, the practitioner is now
required to understand thoroughly the nature of their own business transactions and then select the appropriate principles
in the IFRS applicable
in those conditions.
·
Shifting from Historical
Cost Principle to Fair Value Principle
Under IFRS, the disclosure of an entity's resources and wealth are required to be more transparent by applying the Fair Value
principles. By this
principle, the entity is required to reflect its market changes directly in
its financial statements
results and positions.
WHAT SORT OF OPPORTUNITIES LIES BEHIND THE ADOPTION OF IFRS?
Nowadays, IFRS has
been adopted in over 100 countries
around the world including
all European Countries and a large number of countries in the Asia Pacific regions such as Australia, Malaysia, Singapore, Hong Kong, Turkey, etc.. This trend will continue to be followed by other countries including the United States
which is also on the track to IFRS convergence.
Therefore, by applying such
globally accepted accounting standards,
an entity will benefit from several strategic
opportunities such as:
·
Ease of access to capital
markets in the world thus gaining in much
less cost of capital,
·
Ease of potential strategic partners or ventures
around the world to assess the financial postures of the entity for possible
business alliance and any kind of cooperation
·
More Objective measurment of the Inter-Segment
Performance, and also...
·
Greater chance to win the annual report award.
In other words, by applying IFRS, an entity is encouraged to progressively expand its business in order to grow, not only
in the domestic market,
but also wide spreading through a very broad global market.
DO IFRS ONLY DEAL WITH ACCOUNTING AND
FINANCE MATTERS?
Absolutely Not. Considering their dramatical changes from
existing accounting standards, IFRS implementation
in several ways,
affect important changes in management policies in doing the business. Implementation of IFRS requires a thorough
evaluation of various policies
and procedures not
only of the accounting/finance,
but also the
marketing, production, human resources,
legal, and information
systems as well.
AS SUCH, DOES THE IMPLEMENTATION
OF IFRS REQUIRES CONSULTANT ASSISTANCE?
Basically, it is not always the case. Several large-scale companies, typically have a capacity of human
resources with adequate number and
competence that enable them to carry out
the entity-wide implementation of IFRS. But unfortunately,
other smaller sized companies put some
effort to implement the IFRS without
considering the necessary prerequisites. As a result, the implementation process
became protracted and the cost becomes very expensive, so eventually the strategic benefits of
implementing IFRS is only a mere hope.
WHAT ARE THE EXPECTED BENEFITS, IF A RELIABLE CONSULTANT IS HIRED FOR THIS
PURPOSE?
Hiring appropriate Consultant for providing
assistance in implementing IFRS, an entity will deserve the following benefits:
·
Learning Process to thoroughly
understand the nature of IFRS will be much more brief,
·
Continuing daily business activities remain sustainable and under management control,
·
Training of human resources in order to implement IFRS becomes more cost-effective,
·
The success of the process of transition to IFRS becomes
more ensured.
WHAT SORT OF THINGS THAT A CONSULTANT
SHOULD CARRY OUT IF HIRED FOR THIS PURPOSE?
·
Perform Gap Analysis is to
identify policies, systems,
and important procedures that do not meet the requirements under IFRS,
·
Provide Alternative Revised Management
Policies that can be selected within an
allowable corridor under IFRS,
·
Develop New Policies and Procedures as agreed
upon by the Management,
·
Provide
Training session for the newly revised Guidelines, Policies, and
Procedures to be well understood by all relevant Entity
personnel,
·
Monitoring and Oversight of the effectiveness of
the implementation of the newly sanctioned Guidelines, Policies, and
Procedures new.
SO WHAT CRITICAL THINGS THAT
SHOULD BE DONE NOW?
To ensure successful implementation of IFRS in
your company, please pay attention to these immediate actions:
·
Perform an Internal Assessment to evaluate the adequacy of your company’s resources to carry out the implementation of IFRS. Identify parts that deserve external assisstance,
·
Ask for a Full Commitment throughout the ranks of Top Management to implement the IFRS and provide the necessary budget,
·
Perform recruitment and negotiations with your Trusted Consultant to handle parts of the implementation phase that can not be handled internally and, last but not least...,
·
Take action now ! Stop
procrastination and avoid unnecessary delay.
IF YOU NEED
MORE INFORMATION ABOUT THE APPLICATION OF IFRS, PLEASE
CONTACT US !!
