Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
IFRS Convergence and Its Impacts on Taxation: A Case
Study on Fixed Assets in Indonesia
Prianto Budi Saptono* and Eko Suwardi**
This study focuses on aspects of the International Financial Reporting Standards
(IFRS) convergence and its impact on taxation in Indonesia, particularly for fixed
assets. The study was conducted by reviewing the accounting and tax aspects
related to fixed assets, comparing them, and identifying the effect of IFRS
convergence in fixed assets for taxation. This study is qualitative and uses
exploratory and descriptive research approach. The study refers to the accounting
standards and related tax laws. The result shows that the application of SFAS 16
(Revised 2011), in particular the use of revaluation model, can raise significant tax
problems. If the revaluation model is applied, but the entity does not apply to the
Directorate General of Taxation (DGT), in practice, gain on the revaluation could
be recognized in the fiscal and taxed at 10% rate. However, if Article 4 paragraph
1 letter m and Article 19 of the Income Tax Act and Minister of Finance Regulation
(MoFR) No. 79/PMK.03/2008 are explored more deeply, the possibility of the
imposition of the final tax (10%) does not need to happen. Explicitly, MoFR No.
79/PMK.03/2008 stipulates that to apply fixed asset revaluation for tax purposes,
taxpayer’s application and the approval of the Director General of Taxation are
required.
Key words: IFRS convergence, accounting, fixed assets, taxation, revaluation
model.
A. Introduction
In Indonesia, Financial Accounting Standards (FAS) that is based on IFRS
(International Financial Reporting Standard) officially commenced since 2012 as
financial reporting standards. In practice, these standards are commonly known
as General FAS. Such term is used by Indonesian Institute of Accountants(IAI) to
differentiate it from FAS for Small Medium Enterprises (SMEs) applied on entity
without significant public accountability. In this case, IAI’s FAS Board decided to
implement convergence to IFRS, instead of adoption. There are some
international accounting standards that have not been applied, i.e. IFRS 1 and
IAS 4. IAI’s FAS Board still also endorsed some accounting standards which are
not convergent to IFRS. In addition, some other standards adopted from IFRS
were also modified.
Related tax problem arises when an entity as a corporate taxpayer is obliged
to apply General FAS. One of tax problems is in the application of Statement of
Financial Accounting Standard (SFAS) 16 (Revised 2011): Fixed Assets. This
SFAS shall be applied for annual periods beginning on or after 1 January 2012.
_____________________________
*Master of Management, Faculty of Economics and Business, Universitas Gadjah Mada
**A Lecturer at the Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia,
Email: fisaqori@yahoo.com,
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
The SFAS refers to International Accounting Standard No. 16 (Revised 2009):
Property, Plant and Equipment. There are two model for subsequent
measurement: cost model and revaluation model.
When applying cost model, entity will not encounter any tax problem as
Indonesian tax regulation stipulates that asset is measured based on historical
cost. However, when applying revaluation model, entity regularly has to revalue its
fixed assets according to paragraph 31 of SFAS 16 (Revised 2011). The
paragraph stipulates as follows:
“After recognition as an asset, an item of fixed asset whose fair value can be
measured reliably shall be carried at a revalued amount, being its fair value at
the date of the revaluation less any subsequent accumulated depreciation and
subsequent accumulated impairment losses. Revaluations shall be made with
sufficient regularity to ensure that the carrying amount does not differ
materially from that which would be determined using fair value at the end of
the reporting period” (IAI, 2011).
If revaluation model as described above is tied up with tax regulation, there
will be gain on fixed asset revaluation. The further question is whether or not tax
authority may impose 10% tax on the gain when the entity does note apply a letter
to get approval from the tax authority. The tax refers to Minister of Finance (MoF)
Regulation no. 79/PMK.03/2008 and Article 19 of Income Tax Law. According to
these rules, an entity as corporate taxpayer is allowable to apply its fixed asset
revaluation for fiscal purpose that is an exemption on 10% tax of capital gain. The
rules stipulates that tax authority has obligation to reply application letter by either
approving or disapproving the application.
In the case that entity is approved by tax authority to revalue its fixed assets
for fiscal purpose, the problem is very simple. The entity is obligated to pay 10%
final tax on gain of fixed asset revaluation approved by tax authority. On the other
hand, if entity applies revaluation model. Then, it revalues its fixed assets without
any approval from tax authority since the entity does not apply any letter to tax
office. Can tax authority impose tax on the gain? Does tax authority accept the
new carrying amount of the assets after revaluation? Such problems are
summarized in Tabel 1.
Tablel 1: Tax Consequences of Revaluation Model Application According to
FAS No.16 (revised 2011)
Implementation of Revaluation Model
1) Taxpayer applies the letter to tax office for
approval
2) Taxpayer does not apply the letter to tax office
for approval
Tax Consequences
Gain on fixed asset revaluation is allowable for tax
purpose and is subject to 10% final tax.
There are two possibilities in the point of tax view:
a) the gain is not allowable and not subject to tax; or
b) the gain is allowable and is subject to 10% final tax
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
B. Problem Formulation and Research Objectives
Referring to the above introduction, there are three problems that need indepth review and they are:
1) what is the difference between accounting treatment and tax treatment for
fixed assets?;
2) what kind of tax impact will arise from the implementation of SFAS 16 (Revised
2011)?; and
3) have Indonesian tax regulations accomodated and anticipated the
development of accounting methods through IFRS convergence?
Based on the introduction and the problem formulation above, this research is
aimed to:
1) identify the difference between accounting treatment and tax treatment for
fixed assets after IFRS convergence in Indonesia; and
2) identify IFRS convergence on fixed assets and its tax impact.
C. Method Dan Resources
This research uses qualitative method. Cooper & Schindler (2008) quoted
opinion of Maanen (1979) concerning the definition of qualitative research as the
following:
“Qualitative research includes an array of interpretive techniques which seek to
describe, decode, translate, and otherwise come to terms with the remaining,
not the frequency of certain more or less naturally occuring phenomena in the
social world”.
Further, Cooper & Schindler (2008) said that this qualitative study can be used to
collect and analyze data. In this case, since the availability of data and information
relevant to IFRS convergence in Indonesia since 2012 and its impact on taxation
is very limited, the research approach uses exploratory and descriptive research.
In the exploratory research, applied methodology is adopted from Cooper &
Schindler (2008). First, concept is more clearly defined and developed; priority is
determinded; and then final research design is developed. Then, descriptive
research is used for answering and disclosing questions related to 5W and 1H
(who, what, when, where, and how) in accordance with research topic. Not all of
our discussions include all 5W and 1 H, however, part of them are expected to
provide enough explanation on the impact of Convergence of IFRS on tax
matters.
In accordance with the research method as described above, references that
are relevant to fixed assets and used in this study include:
1) IAS 16 issued by IASB (International Accounting Standard Board) for the year
2009,
2) SFASs as of 1 July 2009,
3) SFAS 16 (Revised 2011) & Exposure Draft - SFAS 16 (Revised 2010),
4) Tax
regulations
including
laws,
government
regulations,
MoF
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
regulation/decision, Director General of Taxes (DGT) regulations/decisions,
and DGT’s circular letters (relevant to fixed assets);
5) Internet search engine.
In order to obtain simple and comprehensive understanding on accounting
treatment for fixed asset, the linkage of various accounting references are
elaborated and analyzed through diagram as shown in Figure 1. Such a step is
required to support the following steps in the form of analyzing and reviewing the
difference between accounting treatment and tax treatment.
Figure 1 Step to Understand an Accounting Standard Simply and
Comprehensively
Figure 2 Step to Understand A Tax Treatment Simply and Comprehensively
In the next step, as shown in Figure 2, research focuses on tax regulations
relevant to fixed asset treatment. If there is no specific tax regulations on the fixed
asset, study is perfomed to understand tax treatment based on prevailing tax
laws. To get simple and comprehensive understanding, all relevant tax regulations
are analyzed and reviewed integratedly. The word “simple” and “comprehensive”
are emphasized in this case since tax laws have not regulated specific tax
treatment and still need implementative regulations in the form of MoF regulations
and or DGT regulations, even DGT’s circular letter. In some occasion, simple and
comprehensive understanding is obtained after integrated analysis and review on
all relevant tax rules.
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
The following step is to perform comparative analysis, as depicted in Figure
3. This step is to compare simple and comprehensive understanding between
accounting treatment and tax treatment. In addtion, this step also covers the
analysis/identification of tax impact resulted from IFRS convergence in the
issuance of SFAS 16 (Revised 2011).
Figure 3 Step to Analyze Comparison between Accounting Treatment and
Tax Treatment
D. Result and Discussion
D.1. Accounting Treatment for Fixed Asset
D.1.1. Objective and Scope
SFAS 16 (Revised 2011): Fixed Asset supersedes SFAS 16 (Revised 2007):
Fixed Asset. Substantially there is no difference in the two SFASs. SFAS 16
(Revised 2011) only adopts IFRS issued as of 1 January 2009. This SFAS is
adopted from IAS 16 (Revised 2009): Property, Plant and Equipment. Objective
and scope of this SFAS are described in Table 2. Main topics of this SFAS consist
of measurment and recognition.
Table 1 Objective & Scope of SFAS No. 16 (Revised 2011)
Subject
matter
Objective
Scope
Description
 The objective of this SFAS is to prescribe the accounting treatment for fixed assets so that
users of the financial statements can discern information about an entity’s investment in its
fixed assets and the changes in such investment.
 This SFAS shall be applied in accounting for fixed asset except when another SFAS
requires or permits a different accounting treatment;
 This SFAS does not apply to mineral rights and mineral reserves such as oil, natural gas
and similar non-regenerative resources. However, this Standard applies to fixed assets used
to developor maintain the assets relevant to mineral rights and mineral reserves.
 Other SFAS may require recognition of an item of fixed assets based on an approach
different from that in this Standard. For example, SFAS 30: Leases requires an entity to
evaluate its recognition of an item of leased fixed assets on the basis of the transfer of risks
and rewards. However, in such cases other aspects of the accounting treatment for these
assets, including depreciation, are prescribed by this Standard.
 This SFAS applies to properties that is constructed or developed to be used in the future as
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Table 1 Objective & Scope of SFAS No. 16 (Revised 2011)
Subject
matter
Description
investment properties, but does not meet the criteria of investment property’s definition
under SFAS 13: Investment Properties. When construction or development is finished, the
property is categorized as investment property and an entity shall apply SFAS 13.
Investment property being re-developed to be used in the future as investment property as
well shall refer to SFAS 13. An entity using the cost model for investment property in
accordance with SFAS 13 Investment Property shall use the cost model in this Standard.
Source: Paragraph 1-5 SFAS 16 (Revised 2011) (IAI, 2011) and IAS 16 (IASCF, 2009)
D.1.2. Key Concept
The principal issues in accounting for fixed assets are the recognition of the
assets, the determination of their carrying amounts and the depreciation charges
and impairment losses to be recognized in relation to them
In paragraph 6 SFAS 16 (Revised 2011), fixed assets are defined as tangible
items that:
(a)
are held for use in the production or supply of goods or services, for rental
to others, or for administrative purposes; and
(b)
are expected to be used during more than one period.
D.1.3. Accounting Treatment
Table 3 describes summary of primary accounting treatment for fixed asset
based on SFAS 16 (Revised 2011). The treatment refers to italic and bold
paragraphs in the SFAS. Table 3 also describes some other paragraphs in order
to make the description more clear.
Table 2 Accounting Treatment for Fixed Assets Based on SFAS 16 (Revised
2011)
Items
Recognition
Description
 The cost of an item of property, plant and equipment shall be recognised as an asset
if, and only if:
(a) it is probable that future economic benefits associated with the item will flow to
the entity; and
(b) the cost of the item can be measured reliably [par.7]
 SFAS 16 (Revised 2011) does not prescribe the unit of measure for recognition, i.e.
what constitutes an item of fixed asset. Thus, judgement is required in applying the
recognition criteria to an entity’s specific circumstances. It may be appropriate to
aggregate individually insignificant items, such as moulds, tools and dies, and to
apply the criteria to the aggregate value [par.9].
Measurement at
recognition
1) Elements of cost An item of fixed asset that qualifies for recognition as an asset shall be measured at its
cost, comprising.
a) its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates.
b) any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management.
c) the initial estimate of the costs of dismantling and removing the item and restoring
the site on which it is located, the obligation for which an entity incurs either when
the item is acquired or as a consequence of having used the item during a particular
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Table 2 Accounting Treatment for Fixed Assets Based on SFAS 16 (Revised
2011)
Items
Description
period for purposes other than to produce inventories during that period [par.1516].
2) Measurement of a. The cost of an item of fixed asset is the cash price equivalent at the recognition
Cost
date. If payment is deferred beyond normal credit terms, the difference between the
cash price equivalent and the total payment is recognized as interest over the period
of credit unless such interest is capitalized in accordance with SFAS 26: Borrowing
Cost [par.23].
b. Asset acquired in exchange for a non-monetary asset or assets, or a combination of
monetary and non-monetary assets is measured at fair value unless
1) the exchange transaction lacks commercial substance or
2) the fair value of neither the asset received nor the asset given up is reliably
measurable [par.24]
c. The cost of an item of fixed asset held by a lessee under a finance lease is
determined in accordance with SFAS 30 (Revised 2011): Lease [par.27]
d. The carrying amount of an item of fixed asset may be reduced by government
grants in accordance with SFAS 61: Accounting for Government Grants and
Disclosure of Government Assistance [par.28].
Measurement after An entity shall choose either the cost model in paragraph 30 or the revaluation model
recognition
in paragraph 31 as its accounting policy and shall apply that policy to an entire class of
fixed asset [par.29].
1) Cost Model
After recognition as an asset, an item of property, plant and equipment shall be
carried at its cost less any accumulated depreciation and any accumulated
impairment losses [par.30]
2) Revaluation
a. After recognition as an asset, an item of fixed asset whose fair value can be
Model
measured reliably shall be carried at a revalued amount, being its fair value at the
date of the revaluation less any subsequent accumulated depreciation and
subsequent accumulated impairment losses. Revaluations shall be made with
sufficient regularity to ensure that the carrying amount does not differ materially
from that which would be determined using fair value at the end of the reporting
period [par.31].
b. If an item of fixed asset is revalued, the entire class of fixed asset to which that
asset belongs shall be revalued [par.36].
c. If an asset’s carrying amount is increased as a result of a revaluation, the increase
shall be recognized in other comprehensive income and accumulated in equity
under the heading of revaluation surplus. However, the increase shall be
recognized in profit or loss to the extent that it reverses a revaluation decrease of
the same asset previously recognised in profit or loss [par.39].
d. If an asset’s carrying amount is decreased as a result of a revaluation, the decrease
shall be recognized in profit or loss. However, the decrease shall be recognized in
other comprehensive income to the extent of any credit balance existing in the
revaluation surplus in respect of that asset. The decrease recognized in other
comprehensive income reduces the amount accumulated in equity under the
heading of revaluation surplus [par.40].
e. If an entity changes accounting policy from cost model to revaluation model in
fixed asset measurement, the change applies prospectively [par.43]
f. If in an entity, there is fixed asset available for sale, accounting treatment for the
asset is as follows:
1) the asset is recognized when discontinued operation;
2) the asset is measured at carrying amount or fair value minus selling costs of the
asset, whichever is lower;
3) the asset is presented as asset held available for sale if its carrying amoung will
be recovered through sales from further usage; and
4) the asset is disclosed in the financial statement in order to evaluate the impact
of discontinued operation and disposal of non-current asset [par.45].
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Table 2 Accounting Treatment for Fixed Assets Based on SFAS 16 (Revised
2011)
Items
Depreciation
Description
a. Each part of an item of fixed asset with a cost that is significant in relation to the
total cost of the item shall be depreciated separately [par.46].
b. The depreciation charge for each period shall be recognised in profit or loss unless
it is included in the carrying amount of another asset [par.51].
c. The depreciable amount of an asset shall be allocated on a systematic basis over its
useful life [par.53].
d. The residual value and the useful life of an asset shall be reviewed at least at each
financial year-end and, if expectations differ from previous estimates, the change(s)
shall be accounted for as a change in an accounting estimate in accordance with
SFAS 25 (Revised 2009): Accounting Policies, Changes in Accounting Estimates
and Errors [par.54].
e. The depreciation method used shall reflect the pattern in which the asset’s future
economic benefits are expected to be consumed by the entity [par.63].
f. The depreciation method applied to an asset shall be reviewed at least at each
financial year-end and, if there has been a significant change in the expected
pattern of consumption of the future economic benefits embodied in the asset, the
method shall be changed to reflect the changed pattern. Such a change shall be
accounted for as a change in an accounting estimate in accordance with SFAS 25
(Revised 2009) [par.64].
Impairment
 To determine whether an item of fixed asset is impaired, an entity applies SFAS
48: Impairment of Assets. That Standard explains how an entity reviews the
carrying amount of its assets, how it determines the recoverable amount of an asset,
and when it recognises, or reverses the recognition of, an impairment loss [par.66].
 Compensation from third parties for items of fixed asset that were impaired, lost or
given up shall be included in profit or loss when the compensation becomes
receivable [par.67]
Derecognition
1. The carrying amount of an item of fixed asset shall be derecognized:
(a) on disposal; or
(b) when no future economic benefits are expected from its use or disposal
[par.69]..
2. The gain or loss arising from the derecognition of an item of fixed asset shall be
included in profit or loss when the item is derecognized (unless SFAS 30 requires
otherwise on a sale and leaseback). Gains shall not be classified as revenue
[par.70].
3. The gain or loss arising from the derecognition of an item of fixed asset shall be
determined as the difference between the net disposal proceeds, if any, and the
carrying amount of the item [par.73].
Source: SFAS 16 (Revised 2011) (IAI, 2011) and IAS 16 (IASCF, 2009)
D.2. Tax Treatment for Fixed Asset
D.2.1. Asset Measurement Base for Tax Purpose
Tax rules regulate how to measure transaction of asset in more details.
According to Article 10 of Income Tax Law, type of transaction and measurement
base of asset is described in Table 4.
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Table 3 Asset Measurement Base for Tax Purpose
No
Transaction Type
1. Acquisition cost or selling price in an arm’s length transaction
referring to Article 18 paragraph (4) of Income Tax Law
2. Acquisition cost or selling price in related Taxpayers referring
to Article 18 paragraph (4) of Income Tax Law
3. Acquisition value or selling value in the case of an exchange
of assets
4.
Acquisition value or transfer value of transferred asset in the
case of liquidation, merger, split-up, spin-off, split-off, or
taking over of a business
a transfer of asset in the form of donation, including
a) zakat received by any amil zakat body or amil zakat
institution established or legalized by the Government and
eligible recipients of zakat or
b) compulsory religious donation of followers of religions
recognized in Indonesia, received by religious institutions
established and legalized by the government and received
by eligible recipient of donations with the provision thereof
governed by or on the basis of Government Regulation:
 to the extent that it has no linkage(s) of business,
employment, ownership, or possession between related
parties;
 to the extent that it has linkage(s) of business, employment,
ownership, or possession between related parties
6. Grant asset received by family by blood in a straight line of
descent of one degree and by any religious body, including
foundation, cooperative, or individual running micro and
small-scale business with the provision thereof ruled by or on
the basis of the regulation of Finance Minister:
 to the extent that it has no linkage(s) of business,
employment, ownership, or possession between related
parties;
 to the extent that it has linkage(s) of business, employment,
ownership, or possession between related parties
7 Transfer of asset, including cash remittance received by a body
taxpayer as substitute to shares or in substitute to capital
participation
Sumber: adopted from Article 10 of Income Tax Law
Measurement Base
The amount actually paid or actually
received
the amount which should have been
paid or received
the amount which should be paid or
received on the basis of the market
price
the amount which should be paid or
received in accordance with the market
price except the Minister of Finance
otherwise determines
5.
the book value in the hands of the
transferor or other value determined by
the Director General of Taxes
the market value of the asset
the book value in the hands of the
transferor or other value determined by
the Director General of Taxes
the market value of the asset
the market value of the asset
Article 10 of Income Tax law also illustrates how to determine acquisition cost
when exchange of asset takes place.Table 5 shows the illustration. Suppose PT A
and PT B agreed to exchange their assets. PT A owned X asset and PT B owned
Y asset. Although there is no payment between the parties concerned, since the
market price of the property exchanged is Rp 20,000,000.00, then this amount of
Rp 20,000,000.00 will be regarded as the acquisition price which should have
been paid or the sale price which should have been received.
The difference between the market price and the book value of the property
exchanged constitutes profit which is subject to tax. PT A obtained a profit of Rp
10,000,000.00 (Rp 20,000,000.00 – Rp 10,000,000.00) and PT B obtained a profit
of Rp 8,000,000.00 (Rp 20,000,000.00 – Rp 12,000,000.00)
Proceedings of 23rd International Business Research Conference
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Table 4 Illustration on How to Determine Acquisition Cost in an Asset
Exchange for Tax Purpose
Uraian
Book Value
Market Price
Margin
Source: Article 10 of Income Tax Law
PT A’s Asset - X (Rp)
10,000,000
20,000,000
10,000,000
PT B’s Asset - Y (Rp)
12,000,000
20,000,000
8,000,000
D.2.2. Tax Depreciation
Depreciation for tax purpose is regulated in Article 11 of Income Tax Law.
Table 6 summarizes tax treatment according to the tax rule. The description
covers depreciation method and when to start depreciation.
Table 5 Methods and When to Start Tax Depreciation
No
Item
1. Methods
Measurement Base
1) Straight Line Method (SLM)
Depreciation on expenditure for the purchase, establishment, addition, repair, or
change to a tangible asset, except land with the status of ownership right, building
benefit right, business benefit right, and use right, owned and used to obtain,
claim, and maintain income which has a benefit period of more than one year is
calculated in parts of equal sume measure of the benefit period stipulated for the
said asset.
2) Doube Declining Balance Method (DDB)
Depreciation on expenditure for a tangible asset, other than building, may also be
done in descending parts of the useful period, reckoned by applying the
depreciation tariff on residual value, and at the end of the useful period the
residual value is depreciated all at once, provided that it is done consistently.
3) Other Method
Further provision on the depreciation of tangible assets owned by and used in
certain business lines, other than SLM and DDB as described above, shall be
regulated by a regulation of Finance Minister.
2. Commencement 1) Depreciation shall commence in the month expenditures are incurred. For the
of depreciation
asset still in progress, the depreciation shall commence in the month when the
process is completed.
2) Subject to the approval of the Director General of Taxes, a Taxpayer may start to
claim depreciation at the beginning of the month the asset is used to earn, to
collect and to secure income or of the month the asset produces income.
3) If a Taxpayer revalues the asset referred to in Article 19 of Income Tax Law, then
the basis of depreciation for the asset shall be the value resulting from the
revaluation.
Source:Article 11 of Income Tax Law
D.2.3. Classification of Tangible Assets, Useful Lifes and Depreciation Tariffs
To calculate depreciation for tax purpose, useful life and tariff for depreciating
tangible asset is stipulated under Article 11 of Income Tax Law (see Table 7). The
classification of tangible assets according to their useful life referred to in Article
11 paragraph (6) of Income Tax Law is determined by Finance Minister’s
Regulation No. 96/PMK.03/2009 (see Table 8).
Proceedings of 23rd International Business Research Conference
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Tabel 6 Classification of Assets, Depreciation Method, and Depreciation
Tariff
Group of Tangible Assets
I. Non-Building Class
Group 1
Group 2
Group 3
Group 4
II. Building Class
Permanent
Non-Permanent
Useful Life
SLM
Depreciation Rate
DDB
4 year
8 year
16 year
20 year
25%
12.5%
6.25%
5%
20 year
10 year
5%
10%
12,5%
6.25%
12.5%
10%
Source: Article 11 of Income Tax Law
Tabel 7 Classification of Tangible Assets, Other than Building, for Tax
Depreciation Purpose
No
Group
A. Class 1
1. All business type
2.
3.
4.
5.
6.
7.
B.
1.
2.
3.
Type of Tangible Assets
a. Furniture and tools made from wood or rattan, including tables, benches,
chairs, cabinets and the like that are not part of the building.
b. Office machines such as typewriters, calculators, duplicators, copiers,
accounting / bookkeeping machines, computers, printers, scanners and the
like.
c. Other equipment such as amplifiers, tape / cassette, video recorders,
televisions and the like.
d. Motorcycles, bicycles and tricycles.
e. Special fittings (tools) for specific industry / service.
f. Dies, jigs, and mold.
g. Communication tools such as telephone, fax, cell phones and the like
Agriculture,
The tool not driven by a machine such as hoe, animal husbandry, fisheries, rakes,
horticulture, forestry etc.
Food and beverage Movable lightweight machine such as manual huller, dehydrator, pallet, and the
industry
like
Tranportation &
Taxi car, bus, truck used for public transportation.
Warehouse
Semi-conductor
Falsh memory tester, writer machine, biporar test system, elimination (PE8-1),
industry
pose checker.
Mooring equipment Anchor, Anchor Chains, Polyester Rope, Steel Buoys, Steel Wire Ropes,
rental
Mooring Accessories.
Cellular
Base Station Controller
telecommunication
industry
Group 2
All business type
a. Furniture and equipment made from metal, including tables, benches, chairs,
cabinets and the like that are not a part of the building. Air regulating device
such as air conditioning, fans and the like.
b. Car, bus, truck, boat speed and the like.
c. Container and the like.
Agriculture,
a. Agricultural machinery / farm machinery such as tractors and plows, rakes,
horticulture,
planting tool, seed spreader, and the like.
forestry, fisheries
b. Machines that process or produce or manufacture materials or goods for
agriculture, plantation, animal husbandry and fisheries.
Food and beverage a. Machines processesing products from animal, poultry and fisheries, for
industry
example dairy plants, fish canning.
b. Machines processesing products from vegetable, such as palm oil machine,
12
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Tabel 7 Classification of Tangible Assets, Other than Building, for Tax
Depreciation Purpose
No
Group
Type of Tangible Assets
margarine machine, coffee milling, confectionery, grain processing
machinery (such as rice, wheat, tapioca).
c. Machines producing/manufacturing beverages and all kinds of beverage
materials.
d. Machines producing/manufacturing foodstuffs and all kinds of food.
4. Machine industry
Machines producing / manufacturing light machines (eg sewing machine, water
pump).
5. Timber, forestry
a. Logging Machines and equipments.
b. Machines processing or producing or manufacturing forestry materials or
goods.
6. Construction
Equipments such as heavy truck, dump truck, crane buldozer and the like.
7. Transportation and a. Work trucks for transportation and unloading, platform trucks, and the like;
Warehouse
b. Passenger ships, cargo ships, special vessels for transporting specific goods
(e.g. wheat, stones, mining ore, etc.) including air boats, tankers, fishing
vessels and the like, whose weight is up to 100 DWT;
c. Ship made specifically to drag or push boats flares, fire boats, dredgers,
floating faucet and the like whose weight is up to 100 DWT;
d. Sailboats without motors whose weight is up to 250 DWT;
e. Balloon Ships.
8. Telecommunication a. Telephone equipments;
b. Telegraph including telegraph radio and telephone radio.
9. Semi-conductor
Auto frame loader, automatic logic handler, baking oven, ball shear tester,
industry
bipolar test handler (automatic), cleaning machine, coating machine, curing
oven, cutting press, dambar cut machine, dicer, die bonder, die shear test,
dynamic burn-in system oven, dynamic test handler, eliminator (PGE-01), full
automatic handler, full automatic mark, hand maker, individual mark, inserter
remover machine, laser marker (FUM A-01), logic test system, marker (mark),
memory test system, molding, mounter, MPS automatic, MPS manual, O/S tester
manual, pass oven, pose checker, re-form machine, SMD stocker, taping
machine, tiebar cut press, trimming/forming machine, wire bonder, wire pull
tester.
10. Mooring equipment Spoolling Machines, Metocean Data Collector
rental
11. Cellular
Mobile Switching Center, Home Location Register, Visitor Location Register.
telecommunication Authentication Centre, Equipment Identity Register, Intelligent Network Service
Control Point, intelligent Network Service Managemen Point, Radio Base
Station, Transceiver Unit, Terminal SDH/Mini Link, Antenna
C. Group 3
1. Mining other than
Machines used in the mining sector, including machinery processing pelicans
oil and gas
products.
2. Spinning, weaving a. Machines processing / producing textile products (e.g. cotton, silk, artificial
and dyeing
fibers, wool and other animal hair, flax, hemp rugs, fur fabrics, tulle).
b. Machines for preparation, bleaching, dyeing, printing, finishing, texturing,
packaging and the like.
3. Timber
a. Machines processing / producing wood products, goods from straw, grass and
other woven materials.
b. Machinery and sawmill equipment.
4. Chemical industry
a. Machinery that processes/produces chemical products and product related to
the chemical industry (e.g. inorganic chemicals, organic and inorganic
compounds and precious metals, radioactive elements, isotopes, organic
chemicals, pharmaceutical products, fertilizers, dyes, drugs dyes, paints,
varnishes, etheric oils and resinoids-resinonida perfumes, medicines and
medical beauty makeup, soap, detergents and other cleaning organic
materials, substances albumina, adhesives, explosives, pirotehnik products,
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Tabel 7 Classification of Tangible Assets, Other than Building, for Tax
Depreciation Purpose
No
Group
Type of Tangible Assets
lighters, alloy piroforis, photographic goods and cinematography.
b. Machines that process/produce other industrial products (e.g.: artificial resins,
plastic materials, esters and ethers of cellulose, synthetic rubber, artificial
rubber, leather, hides, and skins).
5. Machinery industry Machines that produce / manufacture medium and heavy machinery (eg
automobile engines, ship engines).
6. Transportation and a. Passenger ships, cargo ships, special vessels for the transport of certain goods
warehousing
(eg wheat, rocks, ore, and the like) including air ships and tankers, fishing
vessels and the like, which have a weight of over 100 DWT to 1000 DWT.
b. Ships intended for mengela or pushing boats, flares, fire boats, dredgers,
floating faucet and the like, which has a weight above 100 DWT up to 1,000
DWT.
c. Floating docks.
d. Sailboat with no motor use or weigh over 250 DWT.
e. Airplanes and helicopters of all types.
7. Telecommunication radio navigation device, radar and remote control.
D. Group 4
1. Construction
Heavy equipment for construction
2. Transportation and a. Steam locomotive and tender on the tracks.
warehousing
b. Electric locomotive on rails, run by batteries or electrical power from an
outside source.
c. Locomotive on the other rail.
d. Train, carriage of passengers and goods, including containers specially made
and equipped for towing with a tool or some means of transportation.
e. Passenger ships, cargo ships, special vessels for the transport of certain goods
(eg wheat, rocks, ore, and the like) including air ships and tankers, fishing
vessels and the like, which have a weight of over 1,000 DWT.
f. Ship made specifically to drag or push boats, flares, fire boats, dredgers,
floating taps and so on, which have a weight of over 1,000 DWT.
g. Floating docks.
Source: Minister of Finance (MoF) Regulation No. 96/PMK.03/2009
In association with other types of tangible property, other than building not
listed in Table 8, for the purpose of fiscal depreciation, useful life used in Group 3
(16 years) applies. This rule is stipulated in Article 2 MoF Regulation No.
96/PMK.03/2009. However, taxpayers may obtain useful life determination of
tangible property (other than building) based on the actual useful life. To obtain
such determination, they have to submit an application to the Director General of
Taxation by showing the actual useful life of tangible property. If the application is
denied, the taxpayers still use 16-year useful life in accordance with Group 3 in
Table 8.
D.2.4. Fixed Asset Revaluation for Tax Purpose
The provisions on revaluation of fixed assets for tax purposes is regulated in
the Income Tax Law (Article 4 paragraph (1) point m, Article 11 paragraph (5), and
Article 19). Its technical provisions refer to MoF Regulation No. 79/PMK.03/2008
and Director General of Taxation (DGT) Regulation No. Per-12/PJ/2009. Table 9
outlines a summary of taxation aspects for the fixed asset revaluation.
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Tabel 8 Summary of Taxation Aspects for Fixed Asset Revaluation
No
Item
1. Subject
2.
3.
4.
5.
6.
Description
Companies that can revalue fixed assets for tax purposes are
a) domestic corporate taxpayer, and
b) a permanent establishment (BUT), excluding the company obtained
permission to keep books in English and in U.S. Dollars,
with the conditions that all its tax obligations is fulfilled until the last tax period
prior to the period in which fixed asset revaluation is executed.
Procedure
1) The company files an application to the Director General of Taxation
2) The Director General of Taxes is authorized to issue a decree regarding fixed
asset revaluation of which the company files the application.
3) Revaluation of fixed assets is carried out on:
a) all tangible fixed assets, including land with ownership status or the right
to build, or
b) all tangible fixed assets, excluding land, which is situated in Indonesia,
owned, and used to obtain, collect, and maintain taxable income.
4) Revaluation of fixed assets can not be returned within the period of 5 (five)
years since the revaluation of fixed assets last performed under MoF
Regulation No. 79/PMK.03/2008.
Revaluation Base 1) Revaluation of fixed assets should be based on market value or fair value of
fixed assets that is in force at the time of revaluation of fixed assets are
determined by the registered/official appraiser.
2) In case that market value or fair value determined by the registered appraiser
does not reflect the real situation, the Director General of Taxes is authorized
to redetermine the market value or the fair value of the related assets.
3) Revaluation of fixed assets is made within a maximum period of 1 (one) year
from the date of this report or the appraisal company expert appraiser.
Tax on Gain on
1) The excess of the revaluation of fixed assets in the company's fiscal book
Fixed Asset
value of the original is subject to final income tax of 10% (ten percent).
Revaluation
2) The company, whose financial condition does not allow it to pay off the
income tax payable, may submit a request for payment by installments with
maximum of 12 (twelve) months in accordance with Article 9, paragraph (4)
of Law No. 36 year 2007.
Tax Base for
1) After the month in which the revaluation of fixed assets is made, the
Depreciation after
following conditions apply:
Fixed Asset
a) Tax base for depreciation of fixed assets is the value at the time of the
Revaluation
revaluation;
b) The useful life of fixed assets for tax purpose is adjusted back into the full
useful life of fixed assets for the group;
c) Calculation of depreciation begins in the month in which the fixe asset
revaluation is made.
2) For the fiscal year before the month in which the fixed asset revaluation is
made, the following provisions apply:
a) Tax base for depreciation of fixed assets refers to the value at the
beginning of the fiscal year.
b) The remaining useful life of fixed asset is the remaining useful life at the
beginning of the fiscal year.
c) Depreciation is calculated using prorate basis according to the number of
months in the fiscal year.
3) Depreciation of fixed assets, of which the revaluation is not approved by
DGT, still uses the original tax base and residual useful life before the
revaluation of fixed assets is made.
Tax on assets 1) Transfer (sales) on fixed assets
a) assets in group one or two that have been aproved to be revalued before
transfer (sales)
its useful life expired as stated in article 7 versus (1) b Ministrial decree
after
No. 79/PMK.03/2008; or
revaluation.
b) fixed assets in group 3 and 4, building and land that have been approved
to be revalued before 10 years
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
Tabel 8 Summary of Taxation Aspects for Fixed Asset Revaluation
No
Item
Description
Capital gain from the transfer is taxable and the rate is the highest corporate
tax rate in the time of revaluation minus 10%.
These two a and b principles do not apply for transfer due to force majeur,
combination, merger or expansion that has been aproved by Minister of
Finance and assets widrawl from its normal usage.
The difference between transfer prices with book valeu is considered to be
gain or loss according to Indonesian tax regulation.
7.
Tax on conversion
1) after tax capital gain is recorded as equity
of capital gain to
2) bonus stock based on capital gain is not taxable,
bonus stock.
3) however, for capital gain comes from excess comercial value is taxable.
Source: UU PPh (Pasal 4 ayat (1) huruf m, Pasal 11 ayat (5), dan Pasal 19) jo. PerMenkeu No.
79/PMK.03/2008 dan PerDirjen Pajak No. Per-12/PJ/2009
Revaluation of fixed assets for tax purpose is under Income Tax Act, article 4,
verses 1, number m, article 11, verses 5 and article 19. Technically, this
revaluation is under MOF decree number 79/PMK.03/2008 and Circular of DGT
No. Per-12/PJ/2009.
D.3. Summary The Influence of IFRS Convergence for Fixed Assets on
Income Tax Based on PSAK 16 (Revised 2011) and Tax Regulation as
Stated in Table 9.. Rangkuman Pada Table 10 Contains Asset
Measurement, Depreciation, and Fixed Asset Classification.
Table 9. Summary The Different between Recognition of Fixed Assets for
Accounting and Tax Purpose
No
Items
1. Recognition
Accounting
Taxation
 Fixed asset is recognised if it  Fixed asset is recognised if it has potential
has potential future
future economics benefit and this benefit is
economics benefit and this
reasonably measurable. This asset must be in the
benefit is reasonably
list of asset under MOF decree No.
measurable.
96/PMK.03/2009
2. Measurement  Initial measurement of assets  Initial recognition of assets based on costs.
based on costs.
 The following asset valuation  Measurement based on cost method.
may be based on cost or fair  Measurement based on fair value must be
value.
approved by DGT.
 Fair value method requires
asset is measured based on
market value. Thus the value
may be more or less than
historical cost.
3 Depreciation  No specific method (various  Depreciation and useful life are ruled under
method allowed)
article no. 11 Income Tax Act.
 Useful life based on
 Depreciation is only applied on assets used for
management decision and it
aquiring, maintaining and collecting income.
may change.
 No residual value allowed.
 Residual value is allowed.
3. Asset
 Decreasing asset value is
 Impairment asset value is not allowed.
impairment
allowed
Source: PSAK 16 (Revisi 2011) (IAI, 2011) dan Pasal 11 UU PPh
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
As presented in Table 10, IFRS convergence PSAK 16 (statetement of
financial accounting standard(Revisi 2011) has a substatial influence on taxation
when management choose to use fair value method. As stated before, adoption
fair value method must have an approval from DGT. However, if adoption of fair
value method is not reported to the DGT, the question is whether capital gain is
taxable?
This issue creates controversion among managements/tax payers, consultant
and tax officers. Tax officers contend that this capital gain is taxable, however
management of firms generally have opposite opinion. According to MOF decree
79/PMK.03/2008 capital gain resulted from revaluation of fixed assets that is not
reported to the DGT is not taxable. tentang penilaian kembali aktiva
An other important issue is the diference on depreciable value, thus
depreciation costs. Tax rule uses costs as basis for depreciation, on the other
hand accounting method that adopts fair value, periodically adjust the value of
fixed assets. Up to this time, no regulation which overcome this gap or difference.
E. Conclusion
In conclusion, upon convergence to IFRS, assets may be recorded based on
costs or fair value (value based on revaluation). Cost method is consistent with
current tax regulation, however when firm choose fair value in asset valuation, the
capital gain resulted from the valuation is taxable. In this case firm should ask
permission to the Directorat General of Taxation. Thus, there is no problem when
assets are recorded based on costs, however, when assets are recorded based
on fair value (revaluation) and firms do not report the valuation of assets to the
DGT, two possibilities may imposed to the matter. First, asset valuation is not
recognized fiscally (according to tax rule) and therefore the capital gain is not
taxable. Second, asset valuation is recognized fiscally, consequently the capital
gain resulted from the revaluation is taxable. Scrutinizing tax rule eg. Income Tax
Act, article 4, veses 1, number m and article 19 and MOF decree No.
79/PMK.03/2008, the second possibility can be avoided because the act and the
decree madate revaluation assets for tax purpose must be reported and approved
by the DGT.
Refferences
Cooper, D.R. & Schindler, P.S. Business Research Method. 10th Edition.
International Edition. McGraw Hill Companies Inc. New York. 2008.
Ikatan Akuntan Indonesia. Standar Akuntansi Keuangan Per 1 Juli 2009. Penerbit
Salemba Empat. Jakarta. 2009.
Ikatan Akuntan Indonesia. Undangan Menyusun Kajian atas Topik-Topik
Akuntansi
Terkini
Dalam
Rangka
Konvergensi
IFRS
2012.
http://www.iaiglobal.or.id/berita/detail.php?catid=1&id=123. Diakses tanggal 13
Februari 2010.
Ikatan Akuntan Indonesia. PSAK No. 16 (Revisi 2011): Aset Tetap. IAI. Jakarta.
Proceedings of 23rd International Business Research Conference
18 - 20 November, 2013, Marriott Hotel, Melbourne, Australia, ISBN: 978-1-922069-36-8
2011.
International Accounting Standards Board. International Financial Reporting
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23 Mei 2008. Jakarta.
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