Medco Training PSAK Updates Day 1 - Participant Deck

PSAK Updates Training – Day 1
PT Medco Energi Internasional Tbk

14 September 2022
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This training presentation material and information that will be

presented are intended for informational purpose only and not used or
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or related parties, for a transaction/event.
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©©2022
2022PTPTDeloitte
DeloitteKonsultan
KonsultanIndonesia
Indonesia PSAK
PSAK Updates
Updates Training
Training
22
Agenda
Day 1
Start End Duration Agenda
Opening:
• Opening remarks from Deloitte
08.00 08.15 15 mins • Opening remarks from management
• Safety moment
Overview of the training:
08.15 08.25 10 mins • Explanation about the training schedule and ground rules
• Learning objectives
08.25 08.40 15 mins Pre-test
Focus on Disclosures:
08.40 09.40 60 mins • Disclosure guidance and frameworks
• Amendments to PSAK 1: Presentation of Financial Statements (Disclosure of Accounting Policies)
09.40 09.50 10 mins Q&A Session
09.50 10.05 15 mins Coffee break
10.05 10.55 50 mins Amendments to PSAK 1: Presentation of Financial Statements (Liability classification – Current and Non-current)
11.05 11.50 45 mins Amendments to PSAK 46: Income Taxes (Deferred Tax related to Assets and Liabilities arising from a Single Transaction)
12.00 13.00 60 mins Break
13.00 14.00 60 mins Amendments to PSAK 16: Property, Plant and Equipment (Proceeds before Intended Use)
14.10 14.25 15 mins Coffee break
14.25 15.10 45 mins Amendments to PSAK 57: Provisions, Contingent Liabilities and Contingent Assets (Onerous Contracts)
15.20 15.35 15 mins Post-test
15.35 15.40 5 mins Closing from Deloitte
© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 3

Learning objectives

Learning objectives
1 Understand the key considerations in preparing diclosures
2 Understand the difference requirements between old PSAK and amended PSAK
3 Identify the potential impacts to the Company’s transactions and reporting
4 Understand the disclosure requirements of the PSAK amendments
5 Identify the effective date of PSAK amendments and understand the transitional provisions

Significant Recent Amendments to PSAK
Checklist
PSAK PSAK Relevant

No PSAK
Issued date Effective date to Medco
1 Amendment of PSAK 22: Business Combinations (Definition of Business) 31-Jul-19 1-Jan-21
2 Amendment of PSAK 1: Presentation of Financial Statements (Liability classification – Current and Non-current) 2-Oct-20 1-Jan-23
3 PSAK 74: Insurance Contracts 26-Nov-20 1-Jan-25
4 Amendment of PSAK 57: Provisions, Contingent Liabilities and Contingent Assets (Onerous Contracts) 16-Dec-20 1-Jan-22
5 Amendment of PSAK 71: Financial Instruments (Fee in 10% Test for Derecognition of Financial Liabilities) 16-Dec-20 1-Jan-22
6 Amendment of PSAK 22: Business Combinations (Reference to conceptual framework) 16-Dec-20 1-Jan-22
7 Amendment of PSAK 16: Property, Plant and Equipment (Proceeds before Intended Use) 24-Feb-21 1-Jan-23
8 Amendment of PSAK 73: Leases (Covid-19-related Rent Concessions Beyond 30 June 2021)* 31-Mar-21 1-Apr-21
9 Amendment of PSAK 1: Presentation of Financial Statements (Disclosure of Accounting Policies) 28-Jul-21 1-Jan-23
10 Amendment of PSAK 25: Accounting Policies, Changes in Accounting Estimates and Errors (Definition of Accounting 28-Jul-21 1-Jan-23
Estimate)
11 Amendment of PSAK 46: Income Taxes (Deferred Tax related to Assets and Liabilities arising from a Single Transaction) 24-Nov-21 1-Jan-23
12 Amendment of PSAK 74: Insurance Contracts (Initial Application of IFRS 17 and IFRS 9 – Comparative Information) 17-Dec-21 1-Jan-25
13 Exposure Draft of International SAK, SAK Pillar and SAK Nomenclature 2-Jun-22 1-Jan-23
*This PSAK amendment might be relevant to Medco in the past, but not relevant at the time of the training

Focus on Disclosures

Knowledge check
Quiz Time!
The following are the qualities that need to be reflected by financial statements, except:
A. Comparability
B. Projectability
C. Timeliness
D. Verifiability

Refresher on financial statements component
Statement of Financial Position
Provide information related to financial position in terms of the number and
type of activities (assets) and liabilities (liabilities and equity) of the company
on a certain date.
Statement of Profit & Loss and Comprehensive Income

Measure the economic performance of a business and evaluate the performance
that has been achieved by the company as well as provide an overview of the
achievement of cash flows in the future.
Statement of Changes in Equity

Explain changes in capital along with the causes of their occurrence and identify the
causes of changes in the company's owner's equity on the value of assets that are his
rights (net assets).
Statement of Cash Flow

A summary of cash receipts and payments from a company within a certain
period of time.
Notes to Financial Statement

Provide information on explanations deemed necessary for the existing financial
statements so that the cause becomes clear.
DISCLOSURE
Refresher on financial statement quality
Financial statement
quality
Fundamental Enhancing
Qualities Qualities
Faithful
Relevance Verifiability
Representation Comparability
• Predictive Value
• Completeness Timeliness Understandability
• Confirmatory
• Neutrality
value
• Free from error
• Materiality
! Need to be reflected in disclosures

Refresher on disclosures general focus
PSAK 1 provide minimum requirement of disclosures such as name of the

company, currency, other general information.
PSAK 1 Par 15, 17: Fair presentation of financial position, financial performance
and cash flows of the entity. Faithful representation of transactions, other events
Disclosures and conditions in accordance with the definitions and recognition criteria
Specific disclosure requirements in PSAK

Example: PSAK 16 Par 73 - 79, PSAK 7 for Related Party Transactions
! Disclosure complexity from specific requirements
Do entities need to disclose everything required in specific PSAK,

?
regardless of the materiality?
Example of specific disclosure requirements in PSAK
PSAK 16 paragraph 73 PSAK 7 paragraph 18

Amendments to PSAK 1 – Disclosure of Accounting Policies
Example of Material Accounting Policy
Background:
information
• Accounting policies disclosure is not beneficial for user of the financial statement
• Change in accounting policy result in material
• Different stakeholders’ point of view regarding “significant” accounting policy required by PSAK
information change in financial statement
1c
PSAK 1 Amendment: • Accounting policy choice – i.e., using historical
Not all accounting cost instead of fair value in measurement of
policies regarding investment property
transaction, event or
Material other material • Accounting policy developed in accordance to
Significant Accounting PSAK 25 since no specific PSAK regulated
conditions are material
Accounting Policy Policy to financial report
Information • Judgements applied in accounting policy that have
the most significant effect on the amounts
recognized in financial statement – i.e., when
substantial risk and reward is transferred,
Definition of Material (Par 117)
or
Accounting policy information is material if, when considered together with other assumptions about future applied in accounting
information included in an entity’s financial statements, it can reasonably be expected to policy – i.e., discount rate
influence decisions that the primary users of general-purpose financial statements make
on the basis of those financial statements • Complex accounting when a transaction applies
more than one PSAK

Amendments to PSAK 1 – Disclosure of Accounting Policies
What is the impact and for whom?
These amendments would help entities reduce immaterial accounting policy disclosures in their financial statements. The Board
made it clear that if an entity chooses to disclose immaterial accounting policy information, such information must not obscure
material accounting policy information.
01 The amendments are applied

prospectively, with earlier application
permitted.
02 For this PSAK amendment,
there is no detailed guidance
The amendment on how entities should have
effective date is 1 their materiality process. We
January 2023 found that there is a non-
mandatory guidance from
IFRS Practice Statement 2
that may be applied.

IFRS Practice Statement 2 – Overview as guidance
Provides reporting entities with non-mandatory guidance on making materiality judgements when
preparing general purpose financial statements in accordance with the Standards.
IFRS Practice
Statement 2 May also help other parties involved in financial reporting to understand how an entity makes materiality
judgements when preparing such financial statements.
General topics Making materiality judgements Specific topic

✓ Definition of material ✓ Overview ✓ Prior period
✓ Pervasive and judgement ✓ 4-step materiality process: information
1 ✓
✓
Primary user and information needs
Impact of publicly available
2 ▪ Identify
▪ Assess
3 ✓ Errors
✓ Information
information ▪ Organize about covenants
✓ Interaction with local laws and ▪ Review ✓ Materiality
regulations judgements for
interim reporting

IFRS Practice Statement 2 – Overview as guidance
Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions
Definition of that the primary users of general-purpose financial reports make on the basis of those reports, which provide
Material financial information about a specific reporting entity.
• The need for materiality judgements is pervasive in the preparation of financial statements. An entity
makes materiality judgements when making decisions about recognition, measurement, presentation and
Pervasive and disclosure.
Judgement • When assessing whether information is material to the financial statements, an entity applies judgement to
decide whether the information could reasonably be expected to influence decisions that primary users
make on the basis of those financial statements.
• An entity need not provide a disclosure specified by an IFRS Standard if the information resulting from that
Example of disclosure is not material.
• Conversely, the entity must consider whether to provide information not specified by IFRS Standards if that
Accounting Estimates information is necessary for primary users

IFRS Practice Statement 2 – Making materiality judgments
➢ The materiality process describes how an entity could assess whether information is
Overview material for the purposes of presentation and disclosure, as well as for recognition
and measurement.
➢ Step 1— Identify. Identify information that has the potential to be material.

4-steps process
➢ Step 2— Assess. Assess whether the information identified in Step 1 is, in fact,
material.
➢ Step 3— Organise. Organise the information within the draft financial statements
in a way that communicates the information clearly and concisely to primary
users.
➢ Step 4— Review. Review the draft financial statements to determine whether all
material information has been identified and materiality considered from a wide
perspective and in aggregate, on the basis of the complete set of financial
statements.

IFRS Practice Statement 2 – Making materiality judgments
Step 2: Assess
Quantitative factors
Step 1: Identify
1 Step 3: Organize Step 4: Review
Requirements of PSAK
standards Organize information
Review the FS
Knowledge about within FS
primary users’ common
information needs
2
Qualitative factors

Example on Disclosures
An entity presents property, plant and equipment (PP&E) as a

separate line item in its statement of financial position.
PSAK 16 Par. 74(c) sets out specific disclosure requirements for

Presentation and
PP&E, including the disclosure of the amount of contractual
Disclosure of Property,
commitments for the acquisition of PP&E
Plant and Equipment
How should the entity determine whether to disclose the contractual

?
commitments?

Example on Disclosures
• The entity assesses whether disclosures specified

in PSAK 16 are material information.
• Even if PP&E is presented as a separate line item in
the statement of financial position, not all
disclosures specified in PSAK 16 will automatically
be required.
• If the amount of contractual commitments for the
acquisition of PP&E is not material, the entity is
not required to disclose this information (in the
absence of qualitative information)

Example on making materiality judgments
An entity has identified measures of its profitability as the measures

of great interest to the primary users of its financial statements.
In the current reporting period, the entity signed a five-year contract

with company ABC.
Information about a
related party
Company ABC will provide the entity with maintenance services for
transaction
the entity’s offices for an annual fee.
Company ABC is controlled by a member of the entity’s key

management personnel.
Hence, company ABC is a related party of the entity.

• PSAK 7 Related Party Disclosures requires an entity to disclose, for each

related party transaction that occurred during the period, the nature of
the related party relationship as well as information about the
transaction and outstanding balances.
• The entity started its assessment from a quantitative perspective and
evaluated the impact of the related party transaction against measures
of the entity’s profitability.
Quantitative factor Qualitative factor

Quantitative factor
• PSAK 7 Related Party Disclosures requires an entity to disclose, for each

related party transaction that occurred during the period, the nature of
the related party relationship as well as information about the
transaction and outstanding balances.
• Initially, it is concluded that the impact of the related party transaction
was not material from a purely quantitative perspective
Qualitative factor
• Related parties may enter into transactions that unrelated parties

would not enter into, and the transactions may be priced at amounts
that differ from the price for transactions between unrelated parties.
• The entity identified the fact that the maintenance agreement was
concluded with a related party as a characteristic that makes
information about that transaction more likely to influence the
decisions of its primary users.

Conclusion on materiality
• The entity further assessed the transaction from a quantitative

perspective to determine whether the impact of the transaction could
reasonably be expected to influence primary users’ decisions when
considered with the fact that the transaction was with a related party
(i.e., the presence of a qualitative factor lowers the quantitative
threshold).
• Having considered that the transaction was with a related party, the
entity concluded that the impact was large enough to reasonably be
expected to influence primary users’ decisions.
The entity assessed information about the transaction with company ABC
P
as material and disclosed that information in its financial statements.

Amendments to PSAK 1: Presentation of Financial
Statements
Liability classification – Current and Non-current

Amendments to PSAK 1: Presentation of Financial Statements
Knowledge check
Quiz Time!
Pre-amendment, the following are the criteria to determine whether a liability can be classified as
current, except:
A. it expects to settle the liability in its normal operating cycle
B. the liability is due to be settled within twelve months after the reporting period
it does not have the right at the end of the reporting period to defer settlement of the liability for
C.
at least twelve months after the reporting period
D. it holds the liability primarily for the purpose of trading

Refresher: Scope of PSAK 1
PSAK 1 prescribes the basis for presentation of general-purpose financial statements to ensure
comparability both with the entity’s financial statements of previous periods and with the financial
statements of other entities.
Out of PSAK 1 scope:

✓ structure and content of condensed interim financial statements
✓ Sharia financial statements
✓ non-profit or public sector (need to amend the descriptions used for particular line
items)
✓ entities which have an equity outside the scope of PSAK 50 and/or entities with non-
equity capital (e.g. cooperatives) - may need to adapt the financial statement
presentation of members’ or unitholders’ interests.

Background of the amendment on liability classification
Background of the amendment
Request for clarification
criteria for the classification of a liability as either current

or non-current
having an unconditional right to defer having the discretion to refinance or

settlement [PSAK 1 Par 69(d)] roll over an obligation [PSAK 1 Par 73]
How to reconcile these criteria as having an unconditional right to defer settlement was
seen as a much higher hurdle than having the discretion to defer settlement.

Classification of Liabilities as Current or Noncurrent
Noncurrent Classification Criteria
Before Amendments After Amendments
• Does the entity have a right to defer settlement of

liability for at least 12 months after the end of
• Do you have an unconditional right to defer reporting period?
settlement of liability from at least 12 months after the
end of reporting period? • If the right to defer settlement is subject to the entity
complying with specified conditions, does the entity
meet the conditions at the end of reporting period?
Classification as Current or Noncurrent does not depend on entity’s expectation of exercising that right
Settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services

Classification of Liabilities as Current or Noncurrent
The amendments affect only the presentation of liabilities as current or non-current in the statement of financial position.
However, it should be noted that a changed classification may affect an entity’s financial ratios that are observed by stakeholders
and several with loan covenants.
The amendment
effective date is 1
01 The amendments are applied
retrospectively in accordance
with PSAK 25
02 If an entity applies those
amendments for an earlier
period, it shall disclose that fact
January 2023

Classification of Liabilities as Current or Noncurrent – Example 1
The entity receives a 5-year borrowing with, and has been fully
utilized on 1 October 2021 with due date on 30 September 2026
Annual covenant testing will be performed by Bank, based on the

information on 30 September 2022 that may result in on-demand
Borrowing arrangement
repayment if the covenant is breached
Covenant testing is done by the entity, based on information on 31

December 2021, with ‘Pass’ result

Question
Does the entity classify the liability as current or non-current on 31 December
2021?
A Current
B Non-current

FX convertible bonds will be due on 31 December 2024
The bond consist of financial liability and an option that is granted to

the bondholders to convert the bonds into the entity’s ordinary shares
FX convertible bonds
anytime before maturity
Assumed that the conversion option does not fulfil the definition of
equity instrument because it does not fulfil the ‘fixed-for-fixed’ criteria
and is an embedded derivative that is recognized separately from the
main liability.

Question
Does the entity classify the liability as current or non-current on 31 December
2021?
A Current
B Non-current

Amendments to PSAK 46: Income Taxes
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction

Knowledge check
Quiz Time!
Pre-amendment, a deferred tax liability shall be recognized for all taxable temporary differences, except
to the extent that the deferred tax liability arises from
A. taxable temporary differences from depreciation
initial recognition of an asset or liability at the time of the transaction, affects neither accounting
B. profit nor taxable profit (tax loss)
taxable temporary differences associated with investments in subsidiaries, branches and

C.
associates, and interests in joint arrangements
D. Recognition of post-employment benefit liability from PSAK 24

Overview of currently applicable PSAK 46
Amount of income tax payable to or

The future income tax consequences of
refundable by the tax authorities in
Current tax Deferred tax recovering or settling
respect of the current and previous
the carrying amount of an asset or liability
periods
Profit or loss Tax base of each asset and liability
C Temporary difference between the carrying amount

Other comprehensive income
and tax base
TAX
RETURN Directly to equity Recognition criteria and exceptions in PSAK 46
Business combination Calculation of the deferred tax asset or liability

using the appropriate tax rate
Step 1 Step 2 Assessment on the recoverability of deferred tax assets

Calculate current tax Recognize in the same
liability/assets owing manner as the underlying Recognition of net movement for the period in profit
to/recovered from tax item giving rise to the tax or loss, outside profit or loss, or as part of accounting
authorities for a business combination
Background of amendment of PSAK 46
Background:
• To address potential issues of inconsistency and interpretation by users in respect of the initial recognition exemption (“IRE”)
The initial recognition exemption

PSAK 46 Par 15
A deferred tax liability should be recognised for all taxable temporary differences, unless the deferred tax liability
arises from:
•the initial recognition of goodwill; or
•the initial recognition of an asset or a liability in a transaction which:
a. Is not a business combination; Amend to clarify how
b. at the time of the transaction, affects neither accounting profit nor taxable profit(tax loss); and companies account for
c. at the time of transaction, does not give rise to equal taxable and deductible differences. deferred tax on a single
transaction (e.g. Lease and
decommissioning provisions)
Taxable temporary difference initial recognition

= exemption is not Recognized DTA & DTL
deductible temporary difference applied

Background of amendment of PSAK 46
PSAK 46 exempts companies from recognizing deferred tax when they recognize assets or liabilities for the first time.
There has been some uncertainty about whether this exemption applies to situations where both asset and liability are
recognized at the same time in a single transaction.
➢ Diversity in practice where some companies have recognized deferred taxes in

Pre-Amendment single transaction whilst others have not recognized any deferred tax
(e.g.: Gross method vs Net method)
➢ The amendments clarify that the exemption in PSAK 46 from recognising the
deferred taxes does not apply to transactions where an asset and a liability are
recognized at the same time resulting in equal amounts
Post-Amendment
➢ For example, it means that lessees would not be able to apply the exemption in
PSAK 46 for the right-of-use assets and the lease liabilities. Similarly, companies
recognizing decommissioning liabilities would also not be able to apply the
exemption in PSAK 46.

Impact of amendment and the transition
Companies that have substantial balances of right-of-use assets, lease liabilities, decommissioning obligations and have currently
adopted the policy not to recognize deferred taxes for leases and decommissioning obligations would need to recognize the
additional deferred taxes when the amendments become effective.
At the beginning of the earliest comparative period an entity recognizes :

An entity applies the
amendments to
transactions that occur 01 A deferred tax asset and a deferred tax
liability for all deductible and taxable
temporary differences associated with:
02 The cumulative effect of
initially applying the
on or after the beginning amendments as an
of the earliest A. Right-of-use assets and lease adjustment to the opening
comparative period liabilities balance of retained
presented B. Decommissioning, restoration and earnings (or other
similar liabilities and the component of equity, as
corresponding amounts recognized appropriate) at that date
as part of the cost of the related
asset
Illustrative examples: post-amendment
To illustrate how the deferred tax liabilities on right-of-use assets and deferred tax assets on lease liabilities during the lease period,
with the following assumptions:
• Tax rate 20%
• Company depreciate the right-of-use asset using straight-line method with depreciation rate of 20% (Rp 10.000 for 5 years)
• Accounting profit is Rp70.000 for Year 1 up to Year 5, before accounting depreciation and interest on lease liabilities
• Amortization table for lease liabilities assume that the incremental borrowing rate of lease liabilities is 5%. The lease payment is
done annually with the following scheme
Year Beginning Balance Interest Lease payment Ending Balance

1 50.000 2.500 11.549 40.951
2 40.951 2.048 11.549 31.450
3 31.450 1.572 11.549 21.473
4 21.473 1.074 11.549 10.998
5 10.998 550 11.549 -

Deferred tax liabilities (DTL) on right-of-use assets since the initial recognition up to the end of the lease period (Year 5) are presented in the table below
(accounting depreciation of Rp10.000/year)
Year ROU Asset Tax Base Taxable Temporary DTL (20% tax rate) Annual reversal of DTL
Differences
0 50.000 - 50.000 10.000 -
1 40.000 - 40.000 8.000 (2.000)
2 30.000 - 30.000 6.000 (2.000)
3 20.000 - 20.000 4.000 (2.000)
4 10.000 - 10.000 2.000 (2.000)
5 - - - - (2.000)
The table below illustrates how the deferred tax assets (DTA) on lease liabilities are released from the initial recognition up to the last lease payment in
Year 5:
Year Lease Liabilities Tax Base Deductible Temporary DTA (20% tax rate) Annual reversal of DTA
Differences
0 50.000 - 50.000 10.000 -
1 40.951 - 40.951 8.190 (1.810)
2 31.450 - 31.450 6.290 (1.900)
3 21.473 - 21.473 4.295 (1.995)
4 10.998 - 10.998 2.200 (2.095)
5 - - - - (2.200)
In order to account the net of DTA and DTL each year (with the assumptions of PSAK 46 offset criteria have been fulfilled), the following are the journal
entries:
Year Annual reversal of DTL Annual reversal of Net Deferred tax journal
DTA
0 - - - -
1 (2.000) (1.810) (190) Dr. Deferred Tax Liabilities Rp2.000
Cr. Deferred Tax Assets Rp1.810
Cr. Deferred Tax Expenses Rp190
4 (2.000) (2.095) 95 Dr. Deferred Tax Liabilities Rp2.000
Dr. Deferred Tax Expenses Rp95
5 (2.000) (2.200) 200 Dr. Deferred Tax Liabilities Rp2.000
Dr. Deferred Tax Expenses Rp200

Recognize the temporary differences that can be measured and can be deducted along the lease period of the ROU and lease liabilities, resulting in a
consistent tax expense in the profit/loss as below:
[A] [B] [C] [D] [E]

Year Accounting profit of Rp70.000 Taxable profit Current tax Deferred Tax Total tax
– accounting depreciation (Rp70.000 – lease expense (reversal)/expense expense in PL
and interest expense payment of Rp11.549) (Taxable profit X [C] + [D]
20%)
[B] X 20%
1 57.500 58.451 11.690 (190) 11.500
2 57.952 58.451 11.690 (100) 11.590
3 58.428 58.451 11.690 (5) 11.685
4 58.926 58.451 11.690 95 11.785
5 59.450 58.451 11.690 200 11.890
On each year above, the tax expense in column E has the same results with the tax in the accounting profit/loss, which is Column A x 20%

Amendments to PSAK 16: Property, Plant and Equipment
Proceeds before Intended Use

Knowledge check
Quiz Time!
The following are costs that can be capitalized into the cost of an asset, except:
A. Installation and assembly costs
Costs of testing whether the asset is functioning properly, after deducting the net proceeds
B. from selling any items produced while bringing the asset to that location and condition
C. Asset insurance costs
D. Purchase price

Refresher: What is PSAK 16
are held for use in the production or supply of goods or services,

for rental to others, or for administrative purposes
are expected to be used during more than one period.

Property, Plant and
Equipment,
Example
Machinery , Buildings and improvement, Drilling rigs and
equipment
PSAK 16
The Standard excludes the following from its scope:
property, plant and equipment classified as held for sale
biological assets related to agricultural activity other than bearer plants
mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative
resources.

Refresher: What is PSAK 16
An item of property, It is probable that future economic benefits associated with the asset will flow
plant and equipment is to the entity
Recognition
to be recognised as an
asset if, and only if: The cost of the asset to the entity can be measured reliably
Measurement The amount of cash or cash equivalents paid or the fair value of the
at recognition at cost other consideration given
2 different bases:
Measurement Cost model Depreciation Subsequent costs:

✓ Repairs and maintenance costs
after ✓ Costs of replacement parts
recognition ✓ Major inspections or overhauls
Impairment costs
Revaluation model
© 2022 PT Deloitte Konsultan Indonesia Whichever accounting policy is selected, it is required to be applied to entire classes of property, plant and equipment PSAK Updates Training 48
Measurement at recognition
Cost of property, Initial estimate of the

Costs directly
plant and equipment Purchase price costs of dismantling and
attributable to the asset
(PPE) removing the asset
PSAK 16 requirement before amendment
Examples based on PSAK 16 paragraph 17:

a) costs of employee benefits (as defined in PSAK 24: Employee Benefits) arising directly
from the construction or acquisition of the item of the PPE;
b) costs of site preparation;
c) initial delivery and handling costs;
Amended with
d) installation and assembly costs;
clarification of
e) costs of testing whether the asset is functioning properly, after deducting the net
‘testing whether an
proceeds from selling any items produced while bringing the asset to that location and asset is functioning
condition; and properly’
f) professional fees.
Measurement at recognition
Background
✓ Led to diversity in practice
• deducted only proceeds from selling items produced while testing
• deducted the proceeds of all sales until an asset available for use
✓ For some entities, the proceeds deducted from the cost of an item of property, plant and equipment
could be significant and could exceed the costs of testing
PSAK 16 Amendment
Proceeds from selling items produced before asset is available for use is not deducted from cost of
an item of PPE
Proceeds
Such sales proceeds & related costs are Cost of those items is measured in accordance
before recognised in Profit or Loss with PSAK 14 Inventories
intended use
Example items produced:
Test oil from a development well prior to entering full or normal production
Impact to the Company
Companies need to distinguish between:
Costs of testing (costs

Costs related to items
associated with making the
produced and sold before an
item of PPE available for its
item of PPE is available for use
intended use)
Example: Direct labor to
Example: The costs of drilling
produce the Item
of development wells
Making this allocation of costs may require significant estimation and judgement

Example
PSAK 16 Amendment
Example
• Well testing/development costs are Rp5.000.000
• An entity produce test oil from a development well prior to entering full production. The oil is sold for Rp1.000.000
and the related cost for Rp400.000.
How much is the capitalised cost?
Before Amendment After Amendment

Testing
Testing Cost
Cost Rp5.000.000
Rp5.000.000 Testing Cost Rp5.000.000
Net
Net Proceeds
Proceeds from
from sale
sale the
the items
items (Rp600.000)
(Rp600.000) Net Proceeds from sale the items 0
produced
produced produced
Capitalised
Capitalised cost
cost Rp4.400.000
Rp4.400.000 Capitalised cost Rp5.000.000
Rp600.000
recognised in P/L
PSAK 16 Amendment
PSAK 16 Amendment
Clarification of ‘testing whether an asset is functioning properly’
Terminology
PSAK 16 specifies the need to assess whether technical & physical performance of asset
is capable of being used in production/supply of goods/services, for rental to others, or
for administrative purposes

Presentation and disclosure requirement
PSAK 16 Amendment
Specify the line items in which such proceeds and

costs are included in the statement of comprehensive
income
Disclose separately the sales proceeds If not presented separately in the statement of other
comprehensive income, entity should disclose:
and related production cost recognised
in profit or loss
the amount of proceeds and cost included in profit or
loss for output produced which is not part of the
entity’s ordinary activities and details of which line
items(s) of the statement of comprehensive incomes
the amounts are included within.

Effective date and transitional provisions
Effective date
For annual periods beginning on or after 1 January 2023 (Early application is permitted)
Retrospectively
The cumulative effect
Only to items of property, plant and
equipment made available for use on Transitional as an adjustment to the opening
or after the beginning of the earliest provisions balance of retained earnings at the
period presented in the financial beginning of that earliest period
statements in which the entity first presented
applies the amendments

Example
The entity’s annual reporting period ends on 31 December. It presents only one comparative period.
a) As of 31 December 2021 there were items of PPE under construction, the PPE produce sample products that is sold for
Rp 1.000.000 and the proceeds reduce the cost of PPE (costs of the sample products are negligible as such not included in
the example)
b) Additionally, during 2022 further proceeds of Rp500.000 were credited to PPE and the item was activated in January
2023.
Applying PSAK 16 amendment
In the financial statements for 2023, following adjustments to be made:
as of 1 January 2022:
Dr - PPE under construction Rp1.000.000
Cr - Retained earnings Rp1.000.000
for the year ended 31 December 2022:
Dr - PPE under construction Rp500.000

Cr - P&L Rp500.000

Mini quiz
Quiz Time!
Which of the following statements is not correct?
Before amendment, any proceeds from selling items produced before that asset is available
A.
for use is deducted form cost of Property, Plant, and Equipment
Any proceeds from selling items produced before that asset is available for use
B. is recognised in Profit/Loss
Costs of testing whether the asset is functioning properly is capitalised to

C. Property, Plant, and Equipment
D. Costs of testing whether the asset is functioning properly is recognised in Profit/Loss

Amendments to PSAK 57: Provisions, Contingent
Liabilities and Contingent Assets
Onerous Contracts

Amendments to PSAK 57: Provisions, Contingent Liabilities and Contingent Assets
Knowledge check
Quiz Time!
The following items should be taken into consideration in determining whether a contract
is defined as onerous contract, except…
A. Economic benefits expected to be received under it
B. Only incremental costs of fulfilling the contract
C. All costs directly related to the contract
D. Any compensation or penalties arising from failure to fulfil the contract

Overview of currently applicable PSAK 57
Scope of PSAK 57
Liability of uncertain timing or amount Recognized when, and only when:

Provision Entity’s present obligation arising from past Present obligation Outflow is Ability to Recognized
events for which outflow of resources is expected from past event probable measure
• Possible obligation arises from past events whose existence will be confirmed only by the occurrence or non-
Contingent occurrence of one or more uncertain future events not wholly within the control of the entity, or
Disclosed
liabilities • Present obligation arises from past events that is not recognised because
Not probable that outflow is required OR Amount cannot be measured reliably
Contingent Possible asset arises from past events whose existence will be confirmed only by the occurrence or non- Disclosed
assets occurrence of one or more uncertain future events not wholly within the control of the entity.
Liabilities related to restoration costs (and other costs related to extractive activities)
should be recognized according to PSAK 57 requirements

Onerous contract and cost of fulfilling a contract
Summary of Onerous Contract’s definition
Economic
benefit from Unavoidable costs
the contract of meeting the
obligations under
the contract*
Provision should be recognised for any

unavoidable net loss arising from onerous
contracts
*Unavoidable costs of meeting the obligations under the

contract is the lower of:
cost of fulfilling the any compensation or penalties arising
contract from failure to fulfil the contract
PSAK 57 amendment provide

© 2022 PT Deloitte Konsultan Indonesia clarifies this component PSAK Updates Training 61
Onerous contract and cost of fulfilling a contract
Which aspect changes with the recent amendment?
• Before the amendment

Differing views on what should be included in “cost
of fulfilling contract”:
2 different views
✓ Only incremental costs

✓ All costs directly related to the contract
• After the amendment

Costs directly related to
Clarification the contract
(i.e. incremental costs +
cost of fulfilling
the contract = All costs directly related
to the contract Incremental costs other direct cost
allocation)

Impact to the Company
Who will be impacted?
Entity currently:
Adopt ‘costs directly related Adopt ‘incremental cost’

to the contract’ approach approach
Most likely not significantly affected by Need to recognize higher amount of

related clarification point (and potentially more) provision
Effective for annual periods beginning on or after 1 January 2022

The Company have to apply the amendment to contracts that have not yet completely fulfilled on 1 January 2022.
The Company have to recognize cumulative effect of the amendment as an adjustment to the
opening balance of retained earnings (or other equity component as appropriate) at the date of initial application
Example 1
PT Gunung Pasifik’s revenue contract with customer provide following details:
• Economic benefit of contract: Rp110.000.000 (e.g., remaining contract price to be recognized based on the contract). Revenue of
the contract is recognized overtime.
• Direct labor costs to fulfill the contract: Rp60.000.000 (e.g., salary and wage for employees directly related to contract fulfillment).
• Direct material costs to fulfill the contract: Rp45.000.000.
• Allocation of costs directly related to the activity to fulfill contract: Rp10.000.000 (e.g., contract management’s cost and
depreciation of equipment, supplies, and right-of-use assets).
• Contract termination cost (penalties arising from contract termination): Rp120,000.000
All cost directly related to the contract approach
Incremental cost approach
(as required by the amendment)
[A] Economic benefit Rp110.000.000 Rp110.000.000
[B] Contract termination cost Rp120.000.000 Rp120.000.000
[C] Cost to fulfill Rp105.000.000 Rp115.000.000
(Rp60.000.000 + Rp45.000.000) (Rp60.000.000 + Rp45.000.000 + Rp10.000.000)
[D] Onerous contract? No, the lower of the contract termination Yes, , the lower of the contract termination cost or
cost or the cost to fulfill is Rp105.000.000 the cost to fulfill is Rp115.000.000, which is higher
which is lower than the economic benefit than the economic benefit expected from the
expected from the contract. contract.
Example 2
PT Langit Biru’s annual reporting period ends on 31 December. The Company has 2 contracts with customer:
Contract X
• As of 31 December 2021, it identified an onerous contract X where the provision was calculated taking into account only the incremental
costs of fulfilling the contract (direct salaries and direct materials).
• If all costs that relate directly to the contract (direct salaries, direct materials and share of production overheads) were taken into
account, the provision would be higher by Rp100.000.000.
Contract Y
• As of 31 December 2021, PT Langit Biru considered contract Y for being potentially onerous but concluded that it was not as the
incremental costs of fulfilling the contract did not exceed the expected benefits.
• However, if all costs that relate directly to the contract Y were taken into account, the provision would need to be recognised at
Rp50.000.000.
Applying amendment of PSAK 57

• In the financial statements for 2022, a following adjustment to be made as of 1 January 2022:
Dr. Retained Earning 150.000.000
Cr. Provision for onerous contract 150.000.000
• No adjustments to the comparatives as of 31 December 2021 or for 2021 are needed

Mini quiz
Which of the following statements is a correct statement? Polling Time!
PSAK 57 amendment only impacted companies currently adopting “costs directly related
A.
to the contract” approach in determining cost of fulfilling a contract
The Company have to apply the amendment to all contracts that have not yet completely fulfill
B.
at 31 December 2022
Adjustments related to additional provision due to the amendment should be recognized in

C.
the Retained Earning balance on 1 January 2022
Adjustments related to additional provision due to the amendment should be recognized in

D.
the profit or loss during the period

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clients. Please see www.deloitte.com/about to learn more.
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This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities
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© 2022 PT Deloitte Konsultan Indonesia

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PSAK Updates Training – Day 1

PT Medco Energi Internasional Tbk

This training presentation material and information that will be

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 3

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 4

1 Understand the key considerations in preparing diclosures

3 Identify the potential impacts to the Company’s transactions and reporting

4 Understand the disclosure requirements of the PSAK amendments

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 5

PSAK PSAK Relevant

3 PSAK 74: Insurance Contracts 26-Nov-20 1-Jan-25

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 6

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 7

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 8

Statement of Profit & Loss and Comprehensive Income

Statement of Changes in Equity

Statement of Cash Flow

Notes to Financial Statement

! Need to be reflected in disclosures

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 10

PSAK 1 provide minimum requirement of disclosures such as name of the

Specific disclosure requirements in PSAK

! Disclosure complexity from specific requirements

Do entities need to disclose everything required in specific PSAK,

PSAK 16 paragraph 73 PSAK 7 paragraph 18

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 12

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 13

What is the impact and for whom?

01 The amendments are applied

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 14

General topics Making materiality judgements Specific topic

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 15

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 16

➢ Step 1— Identify. Identify information that has the potential to be material.

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 17

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 18

An entity presents property, plant and equipment (PP&E) as a

PSAK 16 Par. 74(c) sets out specific disclosure requirements for

How should the entity determine whether to disclose the contractual

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 19

• The entity assesses whether disclosures specified

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 20

An entity has identified measures of its profitability as the measures

In the current reporting period, the entity signed a five-year contract

Company ABC is controlled by a member of the entity’s key

Hence, company ABC is a related party of the entity.

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 21

• PSAK 7 Related Party Disclosures requires an entity to disclose, for each

Quantitative factor Qualitative factor

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 22

• PSAK 7 Related Party Disclosures requires an entity to disclose, for each

• Related parties may enter into transactions that unrelated parties

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 23

• The entity further assessed the transaction from a quantitative

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 24

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 25

A. it expects to settle the liability in its normal operating cycle

D. it holds the liability primarily for the purpose of trading

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 26

Out of PSAK 1 scope:

© 2022 PT Deloitte Konsultan Indonesia PSAK Updates Training 27

Background of the amendment

Request for clarification