STATEMENT OF
FINANCIAL ACCOUNTING STANDARD
SFAS No.
32
INDONESIAN INSTITUTE OF ACCOUNTANTS
ACCOUNTING FOR FORESTRY COMPANIES
ACCOUNTING FOR FORESTRY COMPANIES
SFAS No. 32
Statement of Financial Accounting Standard (SFAS) No. 32, Accounting for Forestry
Companies, was adopted by a meeting of the Indonesian Accounting Principles
Committee on August 24, 1994, and was ratified by the Executive Committee of the
Indonesian Institute of Accountants on September 7, 1994.
Compliance with the policies contained in this Statement is not obligatory in the case of
immaterial items.
Jakarta, September 7, 1994
Executive Committee
Indonesian Institute of Accountants
Indonesian Accounting Principles Committee
Hans Kartikahadi
Jusuf Halim
Hein G. Surjaatmadja
Katjep K. Abdoelkadir
Wahjudi Prakarsa
Jan Hoesada
M. Ashadi
Mirza Mochtar
IPG. Ary Suta
Sobo Sitorus
Timoty Marnandus
Mirawati Soedjono
Chairman
Secretary
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
ACCOUNTING FOR FORESTRY COMPANIES
SFAS No. 32
CONTENTS
paragraphs
INTRODUCTION ............................................................................................
Characteristics of Forestry Companies ....................................................
Purpose and Objective.............................................................................
Scope......................................................................................................
01-08
01-03
04-07
08
FINANCIAL STATEMENTS..........................................................................
Balance Sheet .........................................................................................
Income Statement....................................................................................
Notes to the Financial Statements............................................................
09-12
09-10
11
12
REVENUE AND EXPENSES...........................................................................
Revenue...................................................................................................
Expenses.................................................................................................
Operating Expenses.................................................................................
Production Stoppage Expenses................................................................
13-19
13-14
15-16
17
18-19
ASSETS.............................................................................................................
Inventory.................................................................................................
Timber Estate (HTI) in Development......................................................
Deferred Expenses...................................................................................
20-23
20
21-22
23
LIABILITIES AND EQUITY..........................................................................
Development of HTI................................................................................
Forestry Obligations.................................................................................
24-26
24
25-26
TRANSITION...................................................................................................
27
EFFECTIVE DATE........................................................................................
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ACCOUNTING FOR FORESTRY COMPANIES
SFAS No. 32
INTRODUCTION
Characteristics of Forestry Companies
01 The process of producing timber is lengthy, beginning with planting. The
maintenance and collection process is dependent on forest growth which is affected by
plant cycles. For repeatedly harvested natural forests, the cycle takes about 35 years. For
planted forests, the cycle is determined by the type of industry or the type of tree, where
the fastest economic cycle is 8 years for fast growing species.
02
The outputs from forestry activities include the following:
(a)
timber logs;
(b)
products in process; and
(c)
other forest products.
For each activity, the products are specific and possess special characteristics. The
activity and type of product are usually interrelated.
03 Forestry companies, like forest concession holders, have the rights and obligations
for forest concession activities (planning, maintenance, collection, processing and
marketing) and the management of the given areas which includes: planning forestry
activities, organizing technical and professional resources to support forestry activities,
forest exploration activities, forest reservations, monitoring and protection measures.
Purpose and Objective
04 One indication that a company is conducting its forestry activities in a prudent
manner can be ascertained through the financial statements presented.
05 The purpose and objective of forestry accounting is to achieve a standardized
accounting treatment as well as presentation for financial statements of forestry
companies, such as forest concession holders, based on disclosure principles so that they
can be used by various external parties such as authoritative institutions and the general
public.
06 By observing the characteristics and development of the forestry industry within
the framework of government regulations, as well as for interested parties to be abreast of
developments within the forestry industry, the need arises for financial information which
reflects the condition of the industry. For this purpose, an accounting standard is required
to address the accounting treatment and financial reporting for transactions that are
specific to the forestry industry.
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ACCOUNTING FOR FORESTRY COMPANIES
SFAS No. 32
07 Financial accounting standards up to this point have been prepared for general
purposes, and have not addressed accounting standards for specific industries, including
the forestry industry. As a result, there is divergence in practice with regard to accounting
treatments and presentation of financial statements to the point where financial
statements of companies in the forestry industry lack comparability among one another.
To ensure uniformity and harmonization in accounting treatments and presentation of
financial statements for the forestry industry, an accounting standard for the forestry
industry was required.
With the issuance of this accounting standard, all companies affiliated with the
forestry industry are expected to:
(a)
ensure uniformity in accounting practices and financial reporting for forestry
companies in Indonesia so as to facilitate the comparability of financial statements;
(b)
to make financial statements more informative for external parties who are not
affiliated with the company’s business; and
(c)
to enable the government to monitor development and financial condition of
forestry companies.
Scope
08 This Statement is applicable for companies operating in one or more forestry
activities.
FINANCIAL STATEMENTS
Balance Sheet
09 Assets and liabilities are presented in the balance sheet as current or noncurrent.
Asset are classified based on liquidity, while liabilities are classified according to
maturity dates.
10 Balance sheet components should be presented in accordance with other financial
accounting standards for accounts that are general in nature, and in accordance with this
Statement for accounts specifically related to the forestry industry.
Income Statement
11 The cost of goods sold should be presented separately for timber logs and products
in process.
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SFAS No. 32
Notes to the Financial Statements
12 Besides the information that should be disclosed in the notes to the financial
statements in accordance with the financial accounting standards, forestry companies
should also disclose the following specific matters in the notes to financial statements:
(a)
realization of activities and costs related to the reforestation of natural forest, such
as the Selective Cutting and Planting (TPTI) program, forest protection and other
forest preservation activities;
(b)
execution of forest activities;
(c)
details of forest residual areas which have not been managed during the residual
useful life of a Forest Concession Rights (HPH);
(d)
the residual period of Forest Concession Rights (HPH);
(e)
the classification of fixed assets and their use;
(f)
timber estates (HTI) should disclose the total area planted in the current period and
the total area planted to date;
(g)
the company’s shareholder structure and explanation on changes to shareholders in
the current period;
(h)
details of operating income based on the type of activity;
(i)
fulfillment of government obligations such as Reforestation Funds (DR), Forest
Product Fees (IHH), Grading Fees (BPPHH) and other formal fees based on current
regulations;
(j)
the change in the obligation of forestry companies in connection with activities like
reforestation, Selective Cutting and Planting (TPTI), planting uncultivated land,
replanting along main roadsides, forest-village
development,
landscaping
and other conservation efforts should be disclosed as follows:
(i)
beginning balance;
(ii)
provision for current period;
(iii) realization for current period; and
(iv)
(k)
ending balance.
realization of activities related to forest-village development and its related costs;
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ACCOUNTING FOR FORESTRY COMPANIES
(l)
SFAS No. 32
structure and infrastructure construction should be disclosed as follows:
(i)
construction of roads or bridges and related maintenance; and
(ii)
type of roads constructed in the current period and to date.
(m) inventory should be disclosed as follows:
(i)
basis for determining the cost of the inventory;
(ii)
inventory should be classified as timber logs, timber in process, goods in
process, and warehouse supplies including fuel and spare parts at the report
date;
(iii) inventory that is guaranteed and insured.
REVENUE AND EXPENSES
Revenue
13 Operating revenue includes revenue from the sale of forest products, either from
products in process, timber logs or other products.
14
Revenue should be recognized under the accrual basis.
Expenses
15
Expenses should be recognized under the accrual basis.
16 The cost of timber and other forest products includes the cost incurred in
connection with activities such as: planning, planting, maintenance and restoration of the
forest, fire control and forest protection, fulfilling obligations to the country, obligations
to fulfill environmental and social responsibilities, and infrastructure construction. The
accounting treatment for activities related to timber and other forest products are as
follows:
(a)
Planning.
Costs incurred in connection with Forest Concession Rights (HPH) including Forest
Concession Fees (IHPH), cost of preparing the Forest Utilization Working Plan
(RKPH) and the Five Year Working Plan (RKL), are separately capitalized as
deferred expenses and amortized over the period benefited as production costs.
Costs related to preparing the Annual Working Plan (RKT) are included as
production costs in the current period.
(b)
Planting.
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Costs incurred in connection with planting in natural forests are charged to forest
production costs. Costs related to planting trees which are not intended for
harvesting purposes, like planting ground cover, are presented as other expenses.
The costs arising from forestry activities include:
(i)
cost of replanting deforested zones;
(ii)
cost of planting uncultivated land;
(iii) cost of planting alongside roads;
(iv) landscaping; and
(v)
cost of other conservation efforts. These costs should be estimated and
charged to production costs even though the activity may not have been
completed. The remaining estimated obligation amount should be evaluated at
the end of each period.
For Timber Estates:
(i)
When the trees are not ready to be harvested, the costs related to planting
activities are capitalized as “Timber Estate (HTI) in Development” until the
harvesting time, and should be amortized over the concession period.
Amortization should begin from the date of harvesting and is recorded as
production cost. The amortization should be recorded under the straight-line
or unit of production method.
(ii) When the trees are ready to be harvested, the related cost is recorded as
production cost.
(c)
Maintenance and Restoration.
Costs related to maintenance and restoration are expensed as production costs.
Obligations in connection with maintenance and restoration that have not executed
at the report date, should be estimated and presented as the part of total liabilities.
For Timber Estates:
(i)
When the trees are not ready to be harvested, the costs related to maintenance
and restoration activities are capitalized as “Timber Estate (HTI) in
Development” until the harvesting time, and should be amortized over the
concession period. Amortization should begin form the date harvesting
commences and is recorded as production cost. The amortization should be
recorded under the straight-line or unit of production method.
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ACCOUNTING FOR FORESTRY COMPANIES
(ii)
(d)
SFAS No. 32
When the trees are ready to be harvested, the costs related to maintenance and
restoration activities are recorded as production cost.
Fire Control and Forest Protection.
The construction and/or procurement of fire control and forest protection equipment
includes, but is not limited to, construction of watchtowers and posts, construction
of fire hydrants, and procurement of fire trucks. These are capitalized as deferred
charges and amortized over the maximum period of benefit up to the end of the
concession period. Costs related to fire control and forest protection efforts which
includes the mobilization of manpower, material and supplies, and fire insurance
premiums are expensed as production costs.
Obligations relating to fire control and forest protection that have not been executed
at the balance sheet date should be estimated and presented as a component of
liabilities. Costs that arise are expensed in the current period as production costs
under the accrual method.
(e)
Collection of Forest Products.
Costs related to the collection of forest products are expensed as production costs.
(f)
Fulfilling Obligations to the Country.
Forestry companies have technical and financial obligations to the country.
Technical obligations include, but are not limited to, Environmental Impact
Assessment (AMDAL), Statement on Environmental Information (PIL),
Environmental Management Plan and Environmental Control Plan (RPL). Financial
obligations include, but are not limited to, Forest Product Fees (IHH), Grading Fees
(BPPHH), Reforestation Funds (DR), and Land and Building Tax (PBB) area. Costs
related to the preparation of AMDAL, RPL and RKL should be capitalized as
deferred charges and amortized over the benefit period as production cost. Costs
related to fulfilling financial obligations determined by the government, such as
IHH, DR, BPPHH and PBB area, are expensed as production costs under the
accrual basis.
(g)
Fulfillment of Environmental and Social Responsibilities.
Environmental and social responsibilities include forest-village development (Bina
Desa Hutan) and forest-village public development. Costs incurred in connection
with diagnostic studies related to forest-village development are recorded as
deferred charges and amortized over the benefit period as production costs. The
costs related to executing forest-village development should be expensed as
production costs.
(h)
Structure and Infrastructure Construction
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Costs of developing main and branch roads are capitalized and depreciated over the
benefit period and recorded as production costs. Costs of developing sub-branch
roads are expensed as production costs.
Operating Expenses
17 For timber estates, general and administrative expenses that are not related to
planting, maintenance and restoration activities are recorded as general and
administrative expenses.
Production Stoppage Expenses
18 Expenses incurred as a result of normal or routine stoppages in production, such as
those caused by seasonal weather conditions, are recorded as production costs.
19 Expenses incurred as a result of other production stoppages, such as those caused
by natural disasters or fires, are presented as extraordinary items.
ASSETS
Inventory
20 Forest products at Timber Collection Sites (TPN) or collection/accumulation
locations should be recorded as inventory.
Timber Estate (HTI) in Development
21 Forestry companies conducting several forestry activities, including timber estates,
should present deferred expenses relating to industrial forests in development separately
from other deferred expenses under a separate account entitled “HTI in Development”.
This account is presented after current assets but before fixed assets in the balance sheet.
22 For industrial forests, the interest costs incurred on borrowings are capitalized over
one cycle as “HTI in Development” and amortized over the concession period as
production costs.
Deferred Expenses
23 Costs incurred in connection with forestry activities that have a benefit period
greater than one accounting period, such as the costs of obtaining the HPH including the
IHPH, the costs of preparing the RKPH and RKL, and the costs related to environmental
conservation, are recorded as Deferred Expenses and must be amortized based on the
estimated benefit period. Deferred expenses should be presented separately in the balance
sheet.
LIABILITIES AND EQUITY
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SFAS No. 32
Development of HTI
24
Funds received for HTI projects are treated as follows:
(a)
funds received by an enterprise for share capital are presented as a part of equity;
and
(b)
funds received by an enterprise for other than share capital are presented as a part of
liabilities.
Forestry Obligations
25 The estimate of the remaining obligation relating to replanting, TPTI, planting
uncultivated land, planting along roadsides, maintaining villages, landscaping, and other
conservation efforts that have not been executed at the reporting date, should be recorded
as liabilities and presented as part of other liabilities.
26 If the amount of the obligation cannot be determined with certainty, the obligation
should be estimated. At the end of each reporting period, an evaluation should be made
on the estimated remaining obligation and, if necessary, an adjustment is made to the
recorded amount of the obligation. This adjustment should be expensed to production
costs.
TRANSITION
27 The accounting treatment described in this Statement should be applied
prospectively. When applying this Statement for the first time, the amount of the
adjustment relating to forestry obligations can be deferred and amortized over the
remaining HPH period.
EFFECTIVE DATE
28 This Statement becomes effective for financial statements covering periods
beginning on or after January 1, 1995. Earlier application is encouraged.
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