INTEGRATED FINANCIAL REPORTING:

Preparation and Implementation of IFRS 15 / PSAK 72

to Padjadjaran Accountig Week 2019
Universitas Padjadjaran

Bandung, 19 November 2019

CURRICULUM VITAE

Education:
1. Sekolah Tinggi Akuntansi Negara (STAN) – D IV
2. Universitas Gadjah Mada (UGM) – S1 Akuntansi
3. Universitas Gadjah Mada (UGM) – S2
4. Diploma in Telecommunication, Cambridge University

Job Career in PT Telkom Indonesia:

1. Vice President Internal Audit PT Telkom (2008 - 2010)
2. Vice President Finance Policy PT Telkom (2010 - 2013)
3. Leader of Implementation Full Adoption IFRS PT Telkom (2010 - 2012)
4. Senior General Manager Shared Service Operation Finance (2013 - 2016)
5. CFO PT Graha Sarana Duta – Telkom Property (2016 - 2018)
6. Project Leader Implementation IFRS Telkom Group (2018 - 2019)

Award from the Country:

Satyalancana Wira Karya dari Presiden RI (2015)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 Agenda
1. Overview

2. Five Step Model

3. Telkom at A Glance

4. Impact

PT Telkom – Project Implementation IFRS 15, 9, 16

 Agenda
1. Overview

2. Five Step Model

3. Telkom at A Glance

4. Impact

PT Telkom – Project Implementation IFRS 15, 9, 16

 GAP ANALYSIS
Differences between current accounting standard with IFRS 15 / PSAK 72
On 28 May 2014, the
International Accounting
Standard Board (“IASB”)
finally issued the long-
awaited converged
standard with US GAAP
on revenue recognition,
which replaces the
existing revenue
standards.
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
In general, the difference between the current and new revenue standard is as follows:
IAS 18 “Revenue” IFRS 15 “Revenue from contract with
IAS 11 “Construction Contract” customer”
The objective of the new
Separate models for: Single model for Performance standard (i.e. IFRS 15) is
• Construction contracts Obligations (“PO”): • to provide a single,
• Goods • Satisfied over time comprehensive revenue
• Services • Satisfied at a point in time recognition model for all
customer contracts,
Focus on risk and rewards Focus on control • improving comparability
within and across
Limited guidance on: More guidance: industries, as well as
across capital markets.
• Multiple element arrangements • Separating elements,
• Variable consideration • Allocating the transaction price,
• Licences • Variable consideration,
• Licences,
• Options,
• Repurchase arrangements,
and so on….
GAP ANALYSIS

Differences between current accounting standard with IFRS 15 / PSAK 72:

In general, the change of new revenue standard is as follows:

Identify and Allocate to

Different Goods and
Allocate to each distinct good or service provided on a relative standalone selling price basis
Services within a
Contract

Effect of Time Value of Under the new standard, the financing component, if it is significant, is accounted for
Money on Revenue separately from revenue.

Previously, no specific guidance in IAS 18.

Accounting for The new standard distinguishes between a warranty providing assurance that a product
Warranties meets agreed-upon specifications (accounted for as a cost provision) and a warranty
providing an additional service (for which revenue will be deferred).

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

TRANSITION OPTION
Optiom 1A
Key Features
• Restating all prior
reporting periods:
applying the new
guidance to each prior
reporting period
presented.
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
Transition options for implementing IFRS 15 / PSAK 72
Retrospective Modified retrospective
Option 1B Opsi 2
• For completed contracts, an entity need not restate contracts that
begin and end within the same annual reporting period. • Entities can elect to apply the revenue standard
only to contracts not completed at the date of
• For completed contracts that have variable consideration, an entity
initial application (i.e., the beginning of the year
can use hindsight and use the transaction price at the date the
the revenue standard is first applied) will be
contract was completed.
adjusted. Therefore, less contracts to analyze
• For all reporting periods presented before the date of initial
• Entities can choose not to implement practical
application (for example, 1 January 2018 for an entity with a 31
expedient for modification
December year-end), an entity is not required to disclose the
amount of transaction price allocated to the remaining performance
obligations and an explanation of when the entity expects to
recognize that amount as revenue.
• For contracts that were modified before the beginning of the earliest
period presented, an entity need not retrospectively restate the
contract for those contract modifications. Instead, an entity shall
reflect the aggregate effect of all of the modifications that occur
before the beginning of the earliest period presented.
 Agenda
1. Overview

2. Five Step Model

3. Telkom at A Glance

4. Impact

PT Telkom – Project Implementation IFRS 15, 9, 16

5 STEP REVENUE RECOGNITION MODEL

• Identification of the contract

• Determining the contract term
• Termination clause
• Contract combination
• Contract modification
• Identifcation of PO
Identify contract with • Free goods andservices
customer • Principal vs Agent
• Option for additional goods and services

5-Step Revenue • Variable Consideration

• Timing of revenue recognition
Recognition • Significant Financing Component
• Breakage Model • Non Cash Considearation
• Consideration paid or payable to customer
• Non refundable upfront fees

• Method of allocationtransaction price

• Determinatiojn of SSP

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

STEP 1: Identify Contract With Customer

A contract is defined as an agreement between two or more parties that

creates enforceable rights and obligations
Can be written, oral or implied, but must meet specific criteria (IFRS 15.10)

Does not exist if both parties can cancel a wholly unperformed contract without
penalty (IFRS 15.12)

A contract exists only if all the following criteria are met: (IFRS 15.19)

Parties have approved the contract and are committed to perform

Each party’s rights are identifiable

Each party’s payment terms are identifiable

Contract has commercial substance

It is probable the entity will collect the consideration it’s entitled to in

exchange for the transfer of goods/services to the customer
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
STEP 1: Identify Contract With Customer
COMBINING CONTRACT

Source: KPMG

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 STEP 2: Identify Performance Obligation
DISTINC

A good or service is distinct if both of the following criteria are met:

Criterion 1: Criterion 2:
Capable of being distinct
Distinct within the context
Can the customer benefit from the And Is the entity's promise to transfer the
good or service on its own or
good or service separately identifiable
together with other readily
from other promises in the contract?
available resources

Yes No
Distinct - performance Not distinct - combine with
obligations other goods and services

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

STEP 3: Identify Transaction Price
VARIABLE CONSIDERATION

Is The Consideration Variable of Fixed? The entity considers the sum of

probability-weighted amounts for a
Variable Fixed range of possible consideration
Expected amounts.
Value This may be an appropriate estimate If
Estimate amount using the expected
an entity has a large number of
value or most likely amount
contracts with similar
characteristics.
The entity considers the single most
Determine the portion, if any of that amount
likely amount from a range of possible
for which it is probable (highly probable for
IFRS) that a significant revenue reversal will Most Likely consideration amounts.
not subsequently occur Amount This may be an appropriate estimate if
the contract has only two (or perhaps a
few) possible outcomes.

Include the Amount in the Transaction Price *IFRS 15:53 & IFRS 15:54

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

STEP 4: Allocate Taransaction Price
STAND ALONE SELLING PRICE

Stand Alone Selling Price (SSP) is the price at which an entity would sell a promised good or service separately to a
customer.

Allocate based on Relative Stand-Alone Selling Prices (SSP)

Stand Alone Selling Price Method
PO 1 PO 2 PO 3
Adjusted market Evaluate the market in which goods or services
assessment are sold and estimate the price that customers in
Determine Stand-Alone Selling Price (SSP) approach the market would be willing to pay

Is An Observable Price Available?

Expected cost Forecast the expected costs of satisfying a
Yes No plus a margin performance obligation and then add an
Use the Observable approach appropriate margin for that good or service
Price
Estimate Price
Residual
Subtract the sum of the observable stand-alone
approach
selling prices of other goods or services promised
Adjusted Residual (only in limited
Expected in the contract from the total transaction price
market approach circumtances)
cost plus
assessmen (only in limited
a margin
t approach circumtances)
*IFRS 15:79

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

STEP 5: Recognise Revenue
TRANSFER OF CONTROL

Revenue is recognised upon

satisfaction of a performance
obligation by transferring the Control is….
promised good or service to a
customer. 1. The ability to direct the use of, and obtain substantially all of
the remaining benefits from, the asset.
A good or service is considered to be
transferred when (or as) the 2. The ability to prevent other entities from directing the use of,
and obtaining the benefits from, an asset.
customer obtains control.

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

STEP 5: Recognise Revenue
TIMING OF REVENUE RECOGNITION

Over time How can a performance obligation be satisfied?

or
Point in time?
Overtime Point in Time

Control of goods and services is transferred over time if one of the

following three criteria is met:

“Pure service” contracts

The customer The entity’s performance
The entity’s
simultaneously does not create an asset
performance creates or
receives and with an alternative use to
enhances an asset that
consumes the benefits the entity and the entity
the customer controls
provided by the entity’s has an enforceable right to
as the asset is created payment for performance
performance as the
or enhanced completed to date
entity performs

If a performance obligation does

not meet any of those criteria,
control transfers at a point in
time.
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
Key of IFRS 15/ PSAK 72 Recognition Revenue

Identify contract with Identify performance Identify Allocate

Recognise revenue
customer obligation transaction price transaction price

IAS 18/PSAK 23 =
IFRS 15/PSAK 72
IAS 18/PSAK 23 ≠
IFRS 15/PSAK 72

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 Agenda
1. Overview

2. Five Step Model

3. Telkom at A Glance

4. Impact

PT Telkom – Project Implementation IFRS 15, 9, 16

Telkom Indonesia at a Glance

52,09 % 47,91 % 55 Subsidiaries

listed in

Government Public

Portfolio Vision Mission

T I M E S Be the King of Digital in the Region Lead Indonesian Digital Innovation & Globalization

Telcos in Asia Pasific ($Bn)

422

382

376
Source: Bloomberg, IDX (as of Nov 15, 2019)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

Telkom Dual Listing/Regulator

US SEC OJK

Accounting Refer to US GAAP & IFRS Refer to PSAK and

Standard IAS/IFRS

US-SEC OJK Filing April March & April (Dual listed

company)

Auditor One of The Big Four Registered in OJK

(registered in PCAOB-US)

Content • Financial Report Financial Report

FASB & AICPA IAI • Operational Report

Comparison Form 20F – 5 years Financial Report – 2 years

Financial Report – 3 years

Business SOA compliance N/A

Process Internal Control over
Financial Report
IFAS /PSAK *FS filed as part of the prospectus shall be based on IFAS only. The FS is presented without disclosing IFRS reconciliation. Telkom
shall file two sets of Financial reporting separately. One is IFRS base, and the other one is IFAS base.

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

Concern of Audit and Governance of Financial Reporting PT Telkom

PT Telkom since 1995 sold its shares on the NYSE so it must follow the rules issued by the
1 United States Capital Market (US SEC) and implementation SOX

G 20 is committed to implementing one accounting standard and PT Telkom in 2011 has

2 implemented IFRS in full adoption

The PT Telkom Financial Report submitted to the OJK in accordance with VIII.G.7
3 presents IFAS reconciliation with IFRS

4 PCAOB issued the audit report provisions in 2019 must disclose CAM

5 BUMNs that go public must implement compliance audits in accordance with PSA 62

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

General Roadmap – New IFRS/ PSAK Implementation

A successful implementation of IFRS/ PSAK is led by the adoption of a robust framework that has an inherent flexibility and
scalability which can be effectively adopted by Telkom. As illustrated below, the main phases in the framework includes
Scoping & Assessment, Design and Implementation.

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

Milestone Implementation IFRS 15, 9 and 16 & New PSAK

FY18 FY19 FY20 & beyond

IFRS 15 & 9 IFRS 15, 9 & 16 IFRS 15, 9 & 16

PSAK 23 & 55 & PSAK 71, 72, & 73
PSAK 23, 55 & 30

1 January 2018 31 December 2018 31 December 2019

Adoption of IFRS 15 & 9 Adoption of IFRS 16 Adoption of PSAK 71, 72 & 73

Completed IFRS 15 & 9 results
as of Initial Balance &
Regular Balance
Finalize ultimate solution
for IFRS 15, 9 & 16
Finalization of FY’19
Telkom implement audited results in
Quantiy IFRS 15, 9 & 16
ultimate solution for compliance with IFRS
results for Q3’19
IFRS 15, 9 & 16 Quantiy IFRS 15, 9 & 16 15, 9, & 16
results for Q4’19

April 2019 July 2019 Sept 2019

Going forward
1 2 3 4 45 5 6 7
6 8 9
9
Oct 2019 Jan 2020 Mar 2020
Feb 2019 June 2019 Aug 2019

Completed readiness IFRS 16 Telkom have to

implementation
Finalization of FY’18
audited results in
compliance with IFRS
15 & 9
Quantify IFRS 15 & IFRS Quantify IFRS 16 results
for H1’19 implement PSAK 71,
9 results for H1’19 and
72, & 73 for all
IFRS 16 results as of 1 Jan
subsidiaries
2019 (IB)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 Lesson Learn Implementasi IFRS 9, 15, & 16 in Telkom

1
Scoping & Assessment Design Implementation
Business process
IFRS Gap analysis for potential enhancement, design for IT Change management
Implementation changes of existing process workaround and ultimate aspects: policy, process, people,
General Roadmap data/system solution, technical accounting and IT Tools
matters

2 Critical Issues in
Implementation: Regression and modelling to satisfy expected credit loss requirement in IFRS 9 for financial assets i.e.
Account Receivables which more than 1,000 forward looking models produced and evaluated
a) IFRS 9

±1,000,000 orders ±15.000 contracts Determine performance Determine stand-alone Revenue

b) IFRS 15 obligation (PoB) & selling price & allocation recognition and
Contract identification & review transaction price on each PoB reporting

c) IFRS 16 Collect more than 17,000 leases contracts from lessee and lessor transaction for total leases
commitment to measure obligation under capital lease and right of use assets

3 1. Tone of the top 4. System integration (CRM – ERP)

In 2020, IFRS 9, 15 and 16 has to be implement early
Lesson Learned 2. Participation of all unit & Supporting IT tools
in Telkom and all subsidiaries.
3. Data accuracy and availability 5. Dedicated organization

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 Agenda
1. Overview

2. Five Step Model

3. Telkom at A Glance

4. Impact

PT Telkom – Project Implementation IFRS 15, 9, 16

IFRS 15 IMPACT ON INDUSTRIES

Step
Industry Company samples
1 2 3 4 5

Aerospace and defense √ √ √ √

Healthcare √ √

Building and
√
constructions

Lisensors (media, life

√ √ √ √
sciences, franchisors)

Real Estate √ √ √

Telecommunications √ √

*Based on Research by KPMG (2016)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

The NEW IFRS Impact on Other Telco Companies (2018)

Telecom Italia

IFRS 15 DCP
Rev : -0,9% Effective
NI : -2% ICoFR IFRS 15 DCP
IFRS 9 Effective Rev : -0,7% Effective
NI : -9% NI : 1,70% ICoFR
IFRS 16 IFRS 9 (a)
Kualitatif, estimasi dengan Effective
NI : -2,10%
angka IFRS 16
Cumulative NI (c) Kualitatif, estimasi dengan
-11% persentase
Cumulative NI
Spain
-0,4%
IFRS 15 DCP
Rev : -0,07% Effective
NI : 1,36% ICoFR
IFRS 9 (b) Effective
NI : -4,88%
IFRS 16
Kualitatif
IFRS 15 DCP
Cumulative NI Rev : -0,42% Effective
IFRS 15 DCP NI : -0,2%
-3,08% Rev : 0,003% Not Effective ICoFR
NI : 0,70% ICoFR IFRS 9 Effective
NI : -0,2%
IFRS 9 Effective IFRS 16
NI : -1,70%
Kualitatif
IFRS 16
Kualitatif
Cumulative NI
Cumulative NI -0,4%
-1,0%
Philippine
Telephone

24 Juli 2019
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16 27
ANOTHER STUDY THAT FOCUSES ON ASIAN MARKET AND OTHER GLOBAL TELCOS THAT ARE SIMILAR IN
SIZE COMPARED TO TELKOM

Costs to obtain/ fulfill a contract 82%

Timing of revenue recognition (no longer subject to contingent

64%
revenue cap for CPE delivered)

Allocation of transaction price based on SSP 64%

Identification of distinct performance obligations (e.g. free

50%
products)

Multiple component (bundled) contracts 28%

Others* 27%

Variable consideration* 9%

Significant financing component* 5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Number of company affected from 22 Telcos surveyed

A total of 22 Telcos surveyed. *May not have significant impact to Telkom

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 IMPACT In Telecomunication Industry
MULTIPLE DELIVARABLE AGREEMENT - EXAMPLE

• PT Telekomunikasi Indonesia enters into 3 years contract with

XYZ Co. to supply woods e-commerce system service that The following distinc Performance Obligation:
include license, hardware, and to provide e-commerce • Lisence
management and advertising service for a period 3 years on 1 • Hardware
Jun 2016 with revenue sharing method. • E-commerce management
Identify contract with
customer • Advertising service

5-Step
Revenue • Total transaction price is calculated statistically
•The revenue attributable to the licence and Recognitio based on projected income over the contract period.
hardware is recognised at the delivery date • Transaction Price (estimated) is Rp 17.186.539.854
•E-commerce management and advertising n Model
service is satisfied over time.

• SSP determined using expected cost plus a margin approach.

XYZ Company

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

IMPACT In Telecomunication Industry
SIGNIFICANT FINANCING COMPONENT

- The financing component is

It receives recognised as interest
An entity adjusts the transaction expense (when the customer
consideration more price for the effects of the time
than one year before pays in advance),
value of money if the timing of the - or interest income or revenue
or after it transfers payments provides either party
goods or services to (when the customer pays in
with a significant benefit of arrears), and is presented
the customer financing separately from revenue from
contracts with customers.

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 IMPACT In Telecomunication Industry
SIGNIFICANT FINANCING COMPONENT - EXAMPLE

Case Study FINANCING COMPONENT: Contract with ABC co.

Telkom enters into 3 years contract with ABC Co. to
provide manage service for Rp 16.205288.400 as a detail
below:
Recognise Revenue
It will be paid monthly.
• Total transaction price should be deducted interest portion.
• Revenue recognise is 13.701.542.025 as a calculated below

Discount Rate 8%
Total payment 16.205.288.400
Present value 14.365.000.324
Interest portion 1.840.288.076
Contract amount 15.523.409.220
Revenue recorded & accrued 15.523.409.221
Revenue without interest 13.683.121.144 Progress 100%
Adjustment 1.840.288.077

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

IMPACT In Telecomunication Industry
BILLING AND ACCOUNTING SYSTEM

Revenue Recognition IAS 18 / PSAK 23 in Telkom

Billing release Revenue = Final Revenue

Revenue
Order create in CRM form Billing Billing = Payment IAS 18 /
System (Tibs) Adjustment
Term PSAK 23

Revenue Recognation should be

following 5 Step Model

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 IMPACT In Telecomunication Industry
BILLING AND ACCOUNTING SYSTEM
IFRS 16 Lessor
(Revenue)
Enhancement Tools
(EBIS Solution)
IFRS 15
IT INFRASTRUCTURE ULTIMATE

If lease
identify IFRS 15 Revenue
(lessor)
Database 2 Revenue
Recognition Tools Supplying IFRS 15
1 Revenue on
Transactional
Revenue Accounting Item Based
Contract Review Tools
IFRS 15 / PSAK 72

Contract Review Process

Rev. Allocate Revenue
Contract Contract Based on SSP Recognition
POB Identification
Identification Fulfillment

Product Catalog Mgmt

Existing System

Nature of Product
Nature of Account Digitalized Supplying
Basic KL Basic KB Supporting
SSP Costing Billing
Information Information Document informatio
n
for CA/CL
Supplying
Partner
historical 3
Billing Contract Invoice SAP FiCo
Relationship Customer Relationship Management Management Collectibility Management
Management
IFRS 15 for consumer
Marketing gimmick, etc
Consumer

Revenue
Sales Commision Recognition IFRS 15 Revenue
Management Acquisition cost (Cons)
Tools

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

3
IMPACT In Telecomunication Industry
ACCOUNTING FOR CONTRACT MODIFICATION

A contract modification is a change in the scope or price of a contract, or both.

Source: PwC

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

IMPACT In Telecomunication Industry
ACCOUNTING FOR CONTRACT MODIFICATION -EXAMPLE

a customer adds a text

a customer receives
messaging package to an
addition free premium
existing mobile phone change in the contract price
channel cable service, all
service package and pays of a highly customised
remaining services
the standard price offered to piece of software
provided under the original
customers for that
contract are distinct
additional package

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

IMPACT In Telecomunication Industry
NON-REFUNDABLE UPFRONT FEES

Entities may receive payments from customers before goods or services are
provided. In many cases, upfront payments are non-refundable.

Entities must evaluate whether non-refundable upfront fees relate to the transfer
of a (future) good or service

Fees charged for set-up activities – these activities do not

Set-up
depict the transfer of services to a customer and should be
activities
ignored when measuring progress of an entity’s performance

The existence of a non-refundable upfront fee may indicate the arrangement

includes an option for additional goods or services (e.g., renewal option for future
goods or services at a reduced price)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 IMPACT In Telecomunication Industry
NON-REFUNDABLE UPFRONT FEES -EXAMPLE

Telkom enters into a contract with a customer for a licence of its software and a non-cancellable one-year subscription to
access the licensed application (the cloud service)

The contract amount for the software licence is an upfront, non-refundable fee of 1 million

The fee for the cloud services is 500,000 for one year

The customer has the right to renew the cloud services each year for 500,000

How should Telkom account for this transaction?

Software licence and cloud services are a single performance obligation and that the upfront fee is not
associated with the transfer of any other good or service to the customer.

There is an implied performance obligation, the right to renew the cloud services each year for 500,000.

Average customer relationship is three years. As a result, the performance obligations in the contract
include the right to a discounted annual contract renewal and that the customer is likely to exercise
twice

Allocate the 1.5 million transaction price to the identified performance obligations (the cloud services
and the renewal options). The amount allocated to the renewal options would be recognised over
the renewal periods
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
IMPACT In Telecomunication Industry
CONTRACT COST

Incremental costs of obtaining a contract Costs of fulfilling a contract

Costs incurred in fulfilling recognises an asset only if

the fulfilment costs meet the following criteria:

1. Relate directly to an existing contract or specific

anticipated contract
2. Generate or enhance resources of the entity that
will be used to satisfy performance obligations in the
future
3. Expected to be recovered.

Practical expedient to allow immediate expense recognition if the

asset’s amortisation period is one year or less.

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

IMPACT In Telecomunication Industry
CONTRACT COST - EXAMPLE

- Telkom has retail products with 6 million subscribers and spread throughout Indonesia.
- The Retail products have a lot of marketing gimmicks, various sales channel programs (handled by contract workers),
and Add-on products.
- Incremental costs of obtaining a contract: A sales-channel program based on a sales fee / commission makes these
costs capitalized and amortized over the life of customer.
- Costs of fulfilling contract: : Cost to install Indihome because the 3 criteria are met.

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 IFRS 15 /PSAK 72 Impact In Real Estate Industry

PwC
IFRS 15/PSAK 72 Gap Analysis in Real Estate Industry
IFRS 15 “Revenue from contract with customer”
Contract combination:
Contracts entered into at or near the same time, with the same customer (or
related party of the customer) shall be combined if
(i) negotiated as a package,
(ii) the amount of consideration to be paid in one contract depends on the
price or performance of the other contract, or
(iii) the services in the contracts represent a single performance obligation.
Contract modifications (for example, change orders, variations or amendments):
A contract modification is accounted for as a separate contract if:
▪ the modification promises distinct goods or services that result in a separate
performance obligation; and
▪ the new items are priced at their stand-alone selling prices.
Variable Consideration:
▪ Variable consideration (for example, claims) should be estimated and
included in the transaction price to the extent that it is highly probable that
there will be no significant subsequent reversal in the cumulative amount of
revenue recognised. This requires judgement.
▪ Variable consideration should be estimated using the expected value
approach (probability weighted average) or the most likely amount, whichever
is more predictive in the circumstances.
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
Current Standard
▪ Limited guidance under IAS 18.
▪ Many real estate development contracts fall under IAS 18, ‘Revenue
‘because of the guidance in IFRIC 15, Agreements for the construction of
real estate.
▪ Current IFRS contains limited guidance on the accounting for priced or
unpriced modifications.
▪ IAS 11 requires that a modification for construction contracts in the form of a
change order or variation (the change order will probably be approved by the
customer and the amount of revenue can be reliably measured.)
▪ IAS 18 is not explicit as to whether all elements of consideration must meet
the revenue recognition criteria simultaneously in order for any portion of the
revenue to be recognised.
▪ The guidance in IAS 11 on contingent consideration is centred upon whether
the consideration is reliably measurable. Construction contracts with variable
consideration are generally accounted for based on amount of consideration
expected to be received.
IFRS 15/PSAK 72 Gap Analysis in Real Estate Industry
IFRS 15 “Revenue from contract with customer”
Recognise revenue when (or as) each performance obligation is satisfied
Real estate developers will need to consider whether they meet any
of the three criteria necessary for recognition of revenue over time.
A performance obligation is satisfied over time when at least one of
the following criteria is met:
▪ The customer receives and consumes the benefits of the
entity’s performance as the entity performs.
▪ The entity’s performance creates or enhances a customer-
controlled asset.
▪ The asset being created has no alternative use to the entity, but
the entity has a right to payment for performance completed to
date.
Methods for recognising revenue when control transfers over time
include:
• Output methods
• Input methods
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
Current Standard
▪ IFRIC 15, Agreements for the construction of real estate,
provides guidance to assess whether a real estate development
contract is in the scope of IAS 11 (a construction service) or IAS
18 (delivery of a good).
▪ Revenue for development units in the scope of IAS 18 is
recognised when the risks and rewards of ownership of the
units pass, which often coincides with the transfer of legal title
or the passing of possession to the buyer.
▪ Revenue is recognised as the construction activity is completed
for contracts within the scope of IAS 11.
IAS 18 requires an entity to recognise revenue for services by
reference to the stage of completion (percentage of completion).
Under IAS 11, a contractor can use either an input method (for
example, cost-to-cost, labour hours, labour cost, machine hours, or
material quantities), an output method (for example, physical
progress, units produced, units delivered, or contract milestones),
or the passage of time to measure progress toward completion.
Specific issues for Real estate entities

Determining Transaction Price

• When determining the transaction price, the main challenge will be the determination of the
variable consideration taking into account a variety of factors.

Significant Judgement
• Significant judgment will be required when revenue is recognized over time. Difficulties can
arise, eg. when determining whether services such as leasing or development activities are
simultaneously received and consumed by the real estate owner.

Initial and Continuing Investment and Involvement

• In case revenue is recognized at a point in time, sellers of real estate no longer need to consider
their initial and continuing investment and continuing involvement, although they must
conclude on the collectability of the transaction price.

Contract Cost
• Existing construction contract guidance contains a substantial amount of guidance on cost
capitalisation. The guidance in the new standard could result in a change in the measurement
and recognition of contract costs as compared to today.

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

 ANY QUESTION?

PwC
THANK YOU
 APPENDIX

PwC
IMPACT In Telecomunication Industry
Financial Statement Telkom 2018 (1)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

IMPACT In Telecomunication Industry
Financial Statement Telkom 2018 (2)
Reference:
a. Hak atas tanah
Under IFRS, land rights are recorded as finance leases and
are presented as part of fixed assets (amortized over the
lease period)
b. Related Party
1 Under IFRS, entities related to government are entities that
2 are controlled, jointly controlled or influenced by a
government
3
c. Pengakuan Pendapatan dan Beban (IFRS 15)
4
Under IFRS, revenue is recognized when control of a
5
6 product or service is transferred to the customer and
6 measured based on the expected value received in a
contract with the customer
d. Instrumen keuangan (IFRS 9)
7 Under IFRS, the classification of financial assets is classified
based on the entity's business model and the
characteristics of the contractual cash flows of the financial
assets. Recognition of allowance for losses on financial
8
assets using the expected credit loss method

Gap IFRS 15: Variable consideration (Telkom & Telkomsel), Gap IFRS 9: Forward looking model for allowance for
1 dan material right, financing component, & NRUF (Telin) 4 trade receivable, others receivable and others financial 6 Gap IFRS 9: FVTPL equity investment in MDI
asset. (Telkom, Telkomsel, Metra, Telin, Infra, Mitratel,
Gap IFRS 15: Cost to fulfill (Telkom, Telkomsel, Telin) etc) 7 Gap IFRS 15: Financing Cost in Telin
2
Gap IFRS 15: Contract acquisition cost (Sales fee & BDC Telkom) Gap IFRS 9: Telin SG (debt restructuring) Tax Impact IFRS 9 & 15
3 5 8
16/11/2019
Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16
IMPACT In Telecomunication Industry
Financial Statement Telkom 2018 (3)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16

IMPACT In Telecomunication Industry
Financial Statement Telkom 2018 (4)

Telkom Indonesia – Project Implementation IFRS 15, 9, dan 16