Psak 52-rev
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Reporting Currency
SFAS No. 52
CONTENTS
Paragraph Objective
01
Scope
02
Definitions
03
Recording and Reporting currency
04 - 07
Functional currency
08 - 13
The determination of the beginning balance
14 - 15
Comparative presentation
16
A change in the recording and reporting currency
17 - 18
Consolidation
19 - 20
Disclosures
21
Effective Date
22
Attachment
Page 1
Reporting Currency
SFAS No. 52
The standard paragraphs, printed in bold letters and in italics must be read in the context of the explanatory paragraphs and the implementation guide in this statement. There is no requirement to apply this statement on immaterial items. Objective 01.
The objective of this statement is to regulate the currency used by the company in the accounting records and financial statements.
Scope 02.
This statement is applicable to all companies which will or have used currencies other than Rupiah as the reporting currency.
Definition 03.
Followings are definitions of terms used in this statement.
Functional currency is the main currency in the sense of economic substance namely the main currency reflected in the company’s operating activities. Reporting currency is the currency used in presenting the financial report. Recording currency is the currency used by the company to book transactions
Page 2
Reporting Currency
SFAS No. 52
Recording and Reporting currency 04.
The reporting currency used by companies in Indonesia is the Rupiah currency. The company may use any other currency than Rupiah as a reporting currency, only if that currency meets the criteria of a functional currency.
05.
The recording currency must be the same as the reporting currency.
06.
Generally financial statements are reported in local currency. However, if a company uses a currency other than the local currency (for example American dollar) as a reporting currency, then that reporting currency must constitute the functional currency. The functional currency can be the Rupiah currency or a currency other rupiah (for example American dollar), depending on the fact of the economic substance.
07.
The financial statements are intended to provided financial information regarding the company’s performance, financial position and cash flow. The financial statements are the outcome of the accounting records of the company. Accordingly the currency used in the accounting records is the currency used in the financial statements. By this concept, the procedures for the re-measurement of financial statement accounting records or the translation of the financial reports are no longer required, except for comparative period if the company uses this standard for the first time (see paragraph 16) and for consolidated company’s financial report (see paragraph 19), as the financial reports essentially have already been presented in the functional currency.
Functional currency 08.
A currency constitutes a functional currency, if it meets the following indicators on an overall basis (cumulative) : a. Cash flow indicator: the cash flow related to the main activity of the company is dominated by a certain currency. b. Selling price indicator : the selling price of the company’s product for the short term is strongly influenced by fluctuations in the exchange rate of a certain currency or the company’s products are dominantly marketed for exports. c. Cost indicator : the company expenses are dominantly influenced by the fluctuations of a certain currency.
Page 3
Reporting Currency
SFAS No. 52
09.
The selling price or company expenses are strongly influenced by the fluctuation in the exchange rate of a certain currency if the selling price or the expenses are calculated based on the exchange rate of a certain currency.
10.
To determine the functional currency of a company, the indicators mentioned in paragraphs 08 above must be given due considerations. In addition, a company having more than one subsidiary or separate and distinct operations, such as a branch or a division, where the operations can be viewed as an undertaking or a separate operating activity, may use several different functional currencies, so that each currency must be considered in determining the functional currency of the company. In determining the functional currency, the degree of relevance and reliability could be obtained for example by assigning a weight to each indicator and based on the weight of each individual indicator the overall weight can be determined. In this case, the cash inflow has the highest weight. In addition to assigning a weight, other factors which may have an impact on the long term economic condition must also be considered.
11.
The main factors which may influence the determination of the functional currency must be identified so that the company has a consistent yardstick. If these factors cannot be clearly related to one of the currencies as the functional currency, a professional judgement is required by considering the operations and activities of the company in details, which must be done with the highest degree of relevance and reliability.
12.
The accounting treatment for transactions in and the balances of nonfunctional currencies shall be as regulated in SFAS No. 10 regarding transactions in foreign currencies.
13.
The implication of paragraph 12 above is, that currencies other than the functional currency are considered as non-functional currencies, while the functional currency is considered as a base currency in determining the value of exchange or in the calculation of the exchange rate difference. As an example, if based on the fact of the economic substance the functional currency of the company is the American dollar, all other currencies are regarded as non-functional currencies, so that all transactions in the non-functional currencies must be translated into the functional currency.
Page 4
Reporting Currency
SFAS No. 52
The determination of the beginning balance 14.
The determining of the beginning balance for purposes of the accounting records shall be made through the re-measurement of the financial report accounts, as if the functional currency has been used since the date of the transactions. The procedures for the re-measurement are as follows : (i). (ii).
(iii).
(iv).
(v). (vi). (vii).
Monetary assets and liabilities shall be re-measured using the exchange rate on the balance sheet date. Non-monetary assets and liabilities and capital stock shall be remeasured using the historical exchange rate or the exchange rate on the dates of the acquisition of fixed assets, of the occurrence of the liabilities or of the payment of capital stock-subscription. The difference between assets liabilities and capital stock in the new reporting currency which represents the result of the calculation under procedures (i) and (ii) above, shall be booked in the retained earnings or accumulated losses for the period. Income and expenses shall be re-measured using the weighted average exchange rate during the comparative period, except for depreciation expenses of fixed assets or amortization of non-monetary assets, which shall be re-measured using the historical exchange rate of the related assets. Dividends shall be measured using the exchange rate on the date of the declaration of the dividends. The procedures under (ii) and (v) above will produce a difference of the re-measurement which shall be booked in the retained earnings or the accumulated losses for the period; The difference of the re-measurement represents the result of the following calculations : Retained earnings (accumulated losses) at the end of the year (the result of procedure (iii) plus dividends (the result of procedure (v) less the result of the calculation of net profit (loss) during the period being compared with the result of procedure (iv)).
15. The re-measurement as regulated in paragraph 14, shall be performed retroactively to the year when the functional currency became effective. Comparative presentation 16.
Financial statements for the comparative period which do not use the functional currency, must be re-measured and represented, in accordance with the manner described in paragraphs 14 and 15.
Page 5
Reporting Currency
SFAS No. 52
Change in the recording and reporting currency 17.
The company must change the recording and reporting currency to Rupiah, if the functional currency changes from non-Rupiah to Rupiah. A change in the recording and reporting currency must be made at the beginning of the book year, not in the middle of a book year.
18.
A decision of the company to change the reporting currency can only be made if there is a change in the economic substance of the functional currency. During the life of the company the functional currency may change due to changes in operations or in the market.
Consolidation 19.
The consolidated financial statements shall be presented in the functional currency after considering the indicators in paragraph 08 to the parent company and each subsidiary. The translation of the financial statements of the subsidiaries to the functional currency in the consolidated financial statements shall be made in the following manner : (i). (ii). (iii). (iv). (v).
20.
Assets and liabilities shall be translated using the exchange rate on the balance sheet date ; Equity shall be translated using the historical exchange rate; Income and expenses shall be translated using the weighted average exchange rate; Dividends shall be measured using the exchange rate on the date of dividend declaration; The procedures in (i) to (ii) will produce a difference in translation which shall be presented in the equity account as “Translation Difference”.
The recording currency of the parent company should be the same as the consolidated reporting currency.
Page 6
Reporting Currency
SFAS No. 52
Disclosures 21.
The company shall disclose the followings : a. The reasons for the determination of the reporting currency based on the indicators in paragraph 08; b. Changes in the reporting currency and the reasons for the change : (i). a reason for a change based on the indicators in paragraph 08; (ii). the exchange rates (historical, current or weighted average) used in the re-measurement or translation; (iii). a summary of the balance sheet and profit and loss statement presented as a comparison in the previous reporting currency.
EFFECTIVE DATE 22.
This statement becomes effective for the preparation and presentation of financial statements covering the reporting period beginning with or after 1 January, 2000. Early implementation is encouraged.
Page 7
Reporting Currency
SFAS No. 52
Attachment … Attachment …
THE RE-MEASUREMENT TO THE FUNCTIONAL CURRENCY A re-measurement is intended to obtain the same results if the accounting records of the company are maintained in the functional currency. The historical exchange rates, the current exchange and the weighted average exchange rate are used in the re-measurement process. The followings are examples of accounts using historical exchange rate, current exchange rate and the weighted average exchange rate. A.
Accounts re-measured with historical exchange rate Balance Sheet accounts Valuable papers which assessed based on acquisition costs Inventories valued based on acquisition costs Advance payments, such as insurance, advertisement and rent Fixed assets Patent, trademark, license and formulae Goodwill Other intangible assets Deferred expenses and credits, except the acquisition cost of an insurance policy for insurance companies. Deferred income Common stocks Preferred stocks valued based on the issuance price Profit and loss accounts Income and expenses related to non-monetary assets or liabilities Costs of goods sold Depreciation of Fixed Assets Amortization of intangible assets Amortization of Deferred Income.
Page 8
Reporting Currency
B.
SFAS No. 52
Accounts re-measured with the current exchange rate Assets and Liabilities other than those mentioned above shall be measured using the current exchange rate. Generally, accounts using the current exchange rate are the monetary assets and liabilities.
C.
Accounts, re-measured with the weighted average exchange rate The profit and loss accounts should actually be measured using the historical exchange rate. However, if this is implemented, the preparation of the financial statements will become impractical. In this case another method can be adopted, namely by using the weighted average exchange rate, which reflects the exchange rate fluctuation during the period covered by the financial statements
Page 9
SFAS No. 52
CONTENTS
Paragraph Objective
01
Scope
02
Definitions
03
Recording and Reporting currency
04 - 07
Functional currency
08 - 13
The determination of the beginning balance
14 - 15
Comparative presentation
16
A change in the recording and reporting currency
17 - 18
Consolidation
19 - 20
Disclosures
21
Effective Date
22
Attachment
Page 1
Reporting Currency
SFAS No. 52
The standard paragraphs, printed in bold letters and in italics must be read in the context of the explanatory paragraphs and the implementation guide in this statement. There is no requirement to apply this statement on immaterial items. Objective 01.
The objective of this statement is to regulate the currency used by the company in the accounting records and financial statements.
Scope 02.
This statement is applicable to all companies which will or have used currencies other than Rupiah as the reporting currency.
Definition 03.
Followings are definitions of terms used in this statement.
Functional currency is the main currency in the sense of economic substance namely the main currency reflected in the company’s operating activities. Reporting currency is the currency used in presenting the financial report. Recording currency is the currency used by the company to book transactions
Page 2
Reporting Currency
SFAS No. 52
Recording and Reporting currency 04.
The reporting currency used by companies in Indonesia is the Rupiah currency. The company may use any other currency than Rupiah as a reporting currency, only if that currency meets the criteria of a functional currency.
05.
The recording currency must be the same as the reporting currency.
06.
Generally financial statements are reported in local currency. However, if a company uses a currency other than the local currency (for example American dollar) as a reporting currency, then that reporting currency must constitute the functional currency. The functional currency can be the Rupiah currency or a currency other rupiah (for example American dollar), depending on the fact of the economic substance.
07.
The financial statements are intended to provided financial information regarding the company’s performance, financial position and cash flow. The financial statements are the outcome of the accounting records of the company. Accordingly the currency used in the accounting records is the currency used in the financial statements. By this concept, the procedures for the re-measurement of financial statement accounting records or the translation of the financial reports are no longer required, except for comparative period if the company uses this standard for the first time (see paragraph 16) and for consolidated company’s financial report (see paragraph 19), as the financial reports essentially have already been presented in the functional currency.
Functional currency 08.
A currency constitutes a functional currency, if it meets the following indicators on an overall basis (cumulative) : a. Cash flow indicator: the cash flow related to the main activity of the company is dominated by a certain currency. b. Selling price indicator : the selling price of the company’s product for the short term is strongly influenced by fluctuations in the exchange rate of a certain currency or the company’s products are dominantly marketed for exports. c. Cost indicator : the company expenses are dominantly influenced by the fluctuations of a certain currency.
Page 3
Reporting Currency
SFAS No. 52
09.
The selling price or company expenses are strongly influenced by the fluctuation in the exchange rate of a certain currency if the selling price or the expenses are calculated based on the exchange rate of a certain currency.
10.
To determine the functional currency of a company, the indicators mentioned in paragraphs 08 above must be given due considerations. In addition, a company having more than one subsidiary or separate and distinct operations, such as a branch or a division, where the operations can be viewed as an undertaking or a separate operating activity, may use several different functional currencies, so that each currency must be considered in determining the functional currency of the company. In determining the functional currency, the degree of relevance and reliability could be obtained for example by assigning a weight to each indicator and based on the weight of each individual indicator the overall weight can be determined. In this case, the cash inflow has the highest weight. In addition to assigning a weight, other factors which may have an impact on the long term economic condition must also be considered.
11.
The main factors which may influence the determination of the functional currency must be identified so that the company has a consistent yardstick. If these factors cannot be clearly related to one of the currencies as the functional currency, a professional judgement is required by considering the operations and activities of the company in details, which must be done with the highest degree of relevance and reliability.
12.
The accounting treatment for transactions in and the balances of nonfunctional currencies shall be as regulated in SFAS No. 10 regarding transactions in foreign currencies.
13.
The implication of paragraph 12 above is, that currencies other than the functional currency are considered as non-functional currencies, while the functional currency is considered as a base currency in determining the value of exchange or in the calculation of the exchange rate difference. As an example, if based on the fact of the economic substance the functional currency of the company is the American dollar, all other currencies are regarded as non-functional currencies, so that all transactions in the non-functional currencies must be translated into the functional currency.
Page 4
Reporting Currency
SFAS No. 52
The determination of the beginning balance 14.
The determining of the beginning balance for purposes of the accounting records shall be made through the re-measurement of the financial report accounts, as if the functional currency has been used since the date of the transactions. The procedures for the re-measurement are as follows : (i). (ii).
(iii).
(iv).
(v). (vi). (vii).
Monetary assets and liabilities shall be re-measured using the exchange rate on the balance sheet date. Non-monetary assets and liabilities and capital stock shall be remeasured using the historical exchange rate or the exchange rate on the dates of the acquisition of fixed assets, of the occurrence of the liabilities or of the payment of capital stock-subscription. The difference between assets liabilities and capital stock in the new reporting currency which represents the result of the calculation under procedures (i) and (ii) above, shall be booked in the retained earnings or accumulated losses for the period. Income and expenses shall be re-measured using the weighted average exchange rate during the comparative period, except for depreciation expenses of fixed assets or amortization of non-monetary assets, which shall be re-measured using the historical exchange rate of the related assets. Dividends shall be measured using the exchange rate on the date of the declaration of the dividends. The procedures under (ii) and (v) above will produce a difference of the re-measurement which shall be booked in the retained earnings or the accumulated losses for the period; The difference of the re-measurement represents the result of the following calculations : Retained earnings (accumulated losses) at the end of the year (the result of procedure (iii) plus dividends (the result of procedure (v) less the result of the calculation of net profit (loss) during the period being compared with the result of procedure (iv)).
15. The re-measurement as regulated in paragraph 14, shall be performed retroactively to the year when the functional currency became effective. Comparative presentation 16.
Financial statements for the comparative period which do not use the functional currency, must be re-measured and represented, in accordance with the manner described in paragraphs 14 and 15.
Page 5
Reporting Currency
SFAS No. 52
Change in the recording and reporting currency 17.
The company must change the recording and reporting currency to Rupiah, if the functional currency changes from non-Rupiah to Rupiah. A change in the recording and reporting currency must be made at the beginning of the book year, not in the middle of a book year.
18.
A decision of the company to change the reporting currency can only be made if there is a change in the economic substance of the functional currency. During the life of the company the functional currency may change due to changes in operations or in the market.
Consolidation 19.
The consolidated financial statements shall be presented in the functional currency after considering the indicators in paragraph 08 to the parent company and each subsidiary. The translation of the financial statements of the subsidiaries to the functional currency in the consolidated financial statements shall be made in the following manner : (i). (ii). (iii). (iv). (v).
20.
Assets and liabilities shall be translated using the exchange rate on the balance sheet date ; Equity shall be translated using the historical exchange rate; Income and expenses shall be translated using the weighted average exchange rate; Dividends shall be measured using the exchange rate on the date of dividend declaration; The procedures in (i) to (ii) will produce a difference in translation which shall be presented in the equity account as “Translation Difference”.
The recording currency of the parent company should be the same as the consolidated reporting currency.
Page 6
Reporting Currency
SFAS No. 52
Disclosures 21.
The company shall disclose the followings : a. The reasons for the determination of the reporting currency based on the indicators in paragraph 08; b. Changes in the reporting currency and the reasons for the change : (i). a reason for a change based on the indicators in paragraph 08; (ii). the exchange rates (historical, current or weighted average) used in the re-measurement or translation; (iii). a summary of the balance sheet and profit and loss statement presented as a comparison in the previous reporting currency.
EFFECTIVE DATE 22.
This statement becomes effective for the preparation and presentation of financial statements covering the reporting period beginning with or after 1 January, 2000. Early implementation is encouraged.
Page 7
Reporting Currency
SFAS No. 52
Attachment … Attachment …
THE RE-MEASUREMENT TO THE FUNCTIONAL CURRENCY A re-measurement is intended to obtain the same results if the accounting records of the company are maintained in the functional currency. The historical exchange rates, the current exchange and the weighted average exchange rate are used in the re-measurement process. The followings are examples of accounts using historical exchange rate, current exchange rate and the weighted average exchange rate. A.
Accounts re-measured with historical exchange rate Balance Sheet accounts Valuable papers which assessed based on acquisition costs Inventories valued based on acquisition costs Advance payments, such as insurance, advertisement and rent Fixed assets Patent, trademark, license and formulae Goodwill Other intangible assets Deferred expenses and credits, except the acquisition cost of an insurance policy for insurance companies. Deferred income Common stocks Preferred stocks valued based on the issuance price Profit and loss accounts Income and expenses related to non-monetary assets or liabilities Costs of goods sold Depreciation of Fixed Assets Amortization of intangible assets Amortization of Deferred Income.
Page 8
Reporting Currency
B.
SFAS No. 52
Accounts re-measured with the current exchange rate Assets and Liabilities other than those mentioned above shall be measured using the current exchange rate. Generally, accounts using the current exchange rate are the monetary assets and liabilities.
C.
Accounts, re-measured with the weighted average exchange rate The profit and loss accounts should actually be measured using the historical exchange rate. However, if this is implemented, the preparation of the financial statements will become impractical. In this case another method can be adopted, namely by using the weighted average exchange rate, which reflects the exchange rate fluctuation during the period covered by the financial statements
Page 9
