The Annual Financial Statements Requirements for Indonesian Company
Companies registered in Indonesia must submit their annual financial statements to comply with legal requirements. Financial statements are financial reports from a time period of 12 consecutive months, with the normal calendar year of January to December being the most common time period used. However, companies can choose to have a different 12-month period as their fiscal year instead of a calendar year.
Additionally, public companies are required to issue financial statements at certain periods throughout the year and also issue reports covering the complete year’s financial activity. The full-year reports are accepted as the company’s annual financial statements.
Why Do Indonesian Companies Need to File Annual Financial Statements?
It is a legal requirement for companies to file annual financial statements. Financial statements help in providing information on the financial well-being of a company to shareholders and members of the public. Potential investors use the information contained within financial statements to assess the level of security of their investments in the company. Such information must also be made available to any authorities who request access to it.
Furthermore, financial statements also help to ensure accountability in the use of a company’s finances. A company’s management needs to provide evidence of how capital has been used and for what reasons. An in-depth analysis of the exact calculations and figures contained within the financial statement can also be used as a way to assess a company’s growth and determine what areas need to be improved.
What Should the Financial Statement Include?
The Indonesian Financial Accounting Standards (SAK) recommends that an annual financial statement should contain the following information:
- Balance sheet: Includes information on a company’s assets, liabilities, and owner’s equity.
- Profit and loss statement: Provides information on the company’s income, profits, and expenses.
- Cash flow report: Provides a report of the company’s cash flow activities.
- Statement of changes in company equity: Provides a report on changes in equity.
- Notes to the financial report: Used to supplement information on annual financial statements, may include a description of the above items in further detail.
It is important to note that all accounting records and financial statements must be written in the Indonesian language (Bahasa Indonesia). However, permission to use a different language may be obtained from the Ministry of Finance.