MAKALAH

Akuntansi Aktiva Tetap Berdasarkan IAS

Submitted to fulfill one of the assignments for the Accounting Theory course

Lecturer:

Tiara Pradani,.M.S.Ak.

Created by:
Aghnia Hunafa 213403181
Alfiyya Rahma Yuniar 213403018
Ananda Syakira 213403539
Bunga Putri Utami 213403538
Syahla Hanifah Aprilia Putri 213403531

PROGRAM STUDI AKUNTANSI

FAKULTAS EKONOMI DAN BISNIS
UNIVERSITAS SILIWANGI
TASIKMALAYA
2023
 PREFACE

First of all, thanks to Allah SWT because the help of Allah, the writer
finished writing the paper entitled “Akuntansi Aktiva Tetap Berdasarkan IAS”
right in the calculated time.
The purpose of writing this paper is to fulfill the assignment given by Mrs.
Tiara Pradani,.M.S.Ak. as a lecturer in Theory Accountant. 
In arranging this paper, the writer truly gets lots of challenges and
obstructions, but with the help of many individuals, those obstructions could pass.
The writer also realized there were still many mistakes in the process of writing
this paper.
Because of that, the writer says thank you to all individuals who helps in
the process of writing this paper. Hopefully, Allah replies to all help and blesses
you all. The writer realized that this paper needs to be improved in arrangement
and content.  Then the writer hopes the readers' criticism can help the writer
perfect the following paper. Last but not least, hopefully, this paper can help the
readers to gain more knowledge about the Theory of Accountants.

Tasikmalaya, February 2023

Author

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 TABLE OF CONTENT

PREFACE.................................................................................................................i
TABLE OF CONTENT...........................................................................................ii
CHAPTER 1 INTRODUCTION............................................................................1
1.1 Background of The Paper..........................................................................1
1.2 Problem Formulation.................................................................................3
1.3 Purpose of The Paper................................................................................3
CHAPTER II THEORY AND DISCUSSION.......................................................3
2.1 Financial Analysis of Fixed Assets...........................................................3
2.2 Cost Allocation..........................................................................................6
2.3 Depreciation..............................................................................................8
2.3.1 Depreciation Process..........................................................................9
2.3.2 Depreciation Method........................................................................10
2.3.3 Disclosure of Depreciation Methods................................................12
2.4 Income and Capital Expenditures............................................................12
2.4.1 Types of Capital Expenditures.........................................................13
2.4.2 Types of Income...............................................................................14
2.5 IAS Recognition and Measurement........................................................15
2.5.1 Preliminary Measurement of Financial Instruments........................16
2.5.2 Subsequent Measurement of Financial Assets.................................16
2.5.3 Fair Value Option.............................................................................17
2.5.4 Other Comprehensive Income Options............................................17
2.5.5 Derecognition of Financial Assets...................................................18
2.6 Case of Fixed Asset Accounting.............................................................19
CHAPTER III CLOSING.....................................................................................18
3.1 Conclusion...............................................................................................18
3.2 Suggest....................................................................................................18
BIBLIOGRAPHY..................................................................................................19

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 1

CHAPTER 1
INTRODUCTION
1.1 Background of The Paper
Financial analysis is the process of evaluating the business, projects,
budgets, and other financial-related transactions to determine their performance
and suitability. Typically, financial analysis is used to analyze whether an entity is
stable, solvable, liquid, or profitable enough to warrant monetary investment.
Financial analysis is used to evaluate economic trends, establish financial policies,
build long-term plans for business activities, and identify projects or companies
for investment.
Suharli (2006: 259) states that fixed assets are tangible assets (tangible
assets). Has an economically useful life of more than one year, has a material
value, and is used for normal operating activities of the company and is an
expenditure of a significant value or material Tangible fixed assets can provide a
fair picture of capitalization by Therefore, there is a need for adequate accounting
treatment from the time of acquisition to with the time of allocating costs over the
life of the tangible fixed asset. Fixed asset treatment this intangible aims to
provide the feasibility of presenting tangible fixed assets as wrong a part of the
company's assets as a whole. According to SAK ETAP regarding Fixed Assets, it
is also stated that: "Fixed assets are presented in the financial statements based on
the acquisition value of these assets minus the accumulated depreciation.
Cost allocation is financing that provides mutual benefits and occurs when
the same resources are used to produce more than one product or service. This can
be exemplified by the cost of a copier at a consulting office supporting more than
one service type. Therefore, the cost of copiers will be charged to every kind of
service in proportion. The production department requires support services:
therefore, support department costs are incurred by the activities of the production
department. The causative factors are variables or activities in the production
department which cause the costs of supporting services to arise. In selecting the
basis for allocating support department costs, an effort should be made to identify
the relevant causal factors (cost drivers). Using causal factors will result in more
 2

accurate product costs. Furthermore, if the causal factors are known, managers
can better control the consumption of support services.
Depreciation is the allocation of the acquisition cost or most of the
acquisition price of a fixed asset over the useful life of the asset. The amount that
can be depreciated is the difference between the acquisition cost and the salvage
value, namely the asset's value at the end of its useful life. There are various
depreciation methods, for example, depreciation over time, based on usage and
other criteria. The usage fee can be treated in 2 (two) ways, namely capitalization
or charged to the current period. Depreciation of fixed assets (Depreciation) is a
consequence of using fixed assets where fixed assets will experience a decline in
function. Financial Accounting Standards (SAK) state that depreciation is the
depreciable amount allocated to each accounting period over its useful life fixed
assets using various methods of systematic depreciation.
Capital Expenditure is the costs incurred to acquire fixed assets, improve
the operational efficiency and productive capacity of fixed assets, and extend the
useful life of fixed assets. These costs are usually incurred in large amounts
(material) but do not occur frequently. Capital expenditures are not charged
directly as expenses in the profit and loss statement but are capitalized first as
fixed assets on the balance sheet because these expenses will benefit.
Revenue Expenditure is costs that will only provide benefits in the current
period, so the costs incurred will not be capitalized as fixed assets on the balance
sheet but will be directly charged as expenses in the income statement for the
current period in which these costs are incurred—the company in the future.
On July 24, 2014, IASB issued IFRS No. 9, "Financial Instruments
(Financial Instruments)." which replaced IAS No. 39, "Financial Instruments:
Recognition and Measurement (Financial Instruments: Recognition and
Measurement)." Criticism of IAS No. 39 states that the standard contains too
many different classification categories and associated impairment models. Many
of these implementation problems are related to the classification and
measurement of financial assets. After reviewing these criticisms, the IASB
decided that the most effective way to address the problem and improve the ability
of users of financial statements to understand better information about the
 3

amounts, timing, and uncertainty of future cash flows is to change the

classification and measurement categories used.

1.2 Problem Formulation

Based on the background of the problems above, it can be concluded that
the formulation of the problem is as follows:
1. What is the financial analysis of fixed assets?
2. What is cost allocation?
3. What is depreciation?
4. What is income and capital expenditure?
5. What is IAS recognition and measurement?

1.3 Purpose of The Paper

Based on the formulation of the problem above, there are objectives as
follows:
1. To know about the financial analysis of fixed assets;
2. To know about cost allocation;
3. To know about depreciation;
4. To know about income and capital expenditures;
5. To know about IAS recognition and measurement.
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CHAPTER II
THEORY AND DISCUSSION
2.1 Financial Analysis of Fixed Assets
Fixed assets refer to physical or tangible things of value a company owns,
such as facilities, equipment, and land. The term "fixed assets" reflects the
traditional notion that these kinds of assets are fixed and do not require much
consideration after purchasing them. Contemporary accounting literature,
however, now calls fixed assets "property, plant, and equipment," for the most
part. Companies rely on their assets, including fixed assets, to generate profits.
For example, modern equipment in good repair is essential for high productivity,
efficiency, and profits. Fixed asset analysis involves calculating a fixed asset's
earnings potential, use, and valuable life. In addition, fixed asset analysis
determines if fixed assets are sufficiently maintained to ensure current and future
earning power and the relative profitability contributed by fixed and fixed asset
acquisitions.
A decrease in operational efficiency and productivity results from the
improper or inadequate maintenance of malfunctioning and inefficient assets and
from the failure to replace obsolete and irreparable assets. Asset analysis
examines the age and condition of each major asset category and the costs of
replacing old assets to determine the output levels, downtime, and temporary
discontinuances. The measure of efficiency involves the calculation of this ratio:
 Fixed asset acquisition to total assets
 Repairs and maintenance to fixed assets
 Repairs and maintenance to sales
 Sales to fixed assets
 Net income to fixed assets
To present the state of or the changes in various plant and equipment
assets, accountants often prepare financial statements and schedules that plot out
this information. These statements include the dispositions of company property,
plant, and equipment and the acquisitions and divestitures of fixed assets. In
preparation for these reports, accountants generally determine the age and
condition of the significant fixed assets and their replacement costs. Technology
 5

companies, in particular, benefit from examining this information. Accountants

also compute the above ratios and compare them with the industry averages to see
how their companies use their fixed assets for their competitors. In addition,
accountants make a note of assets that are no longer being used, as well as those
that are not productive. Companies using specialized equipment—such as those
manufacturing specialized or trendy items—need to keep track of their fixed asset
to avoid obsolescence.
Fixed asset analysis also may involve having accountants determine the
hours or mileage of usage for various assets and produce reports that indicate
hours of use per month for buildings and equipment and the mileage of use per
month for vehicles. Such reports enable efficient comparison and help managers
identify underused assets. Armed with this information, managers can decide
whether to reallocate, sell, or otherwise use or dispose of fixed assets with low
usage.
Companies benefit from fixed asset analysis by taking control of their
fixed assets and maintaining their condition to ensure proper operation.
Controlling fixed assets allows companies to avoid losses associated with misused
and misplaced assets and deterioration. In addition, fixed asset analysis enables
companies to maximize property, plant, and equipment use.
 Financial Analysis of Property, Plants, and Equipment
Analyze the company's profitability by calculating the ratio of return on
assets (Return on Assets-ROA). Profit sustainability is a critical consideration in
this process. For capital-intensive companies, the major part of the underlying
assets are investments in property, plant, and equipment, which is the central
question for investors who analyze these companies regarding their asset
replacement policies. Companies with large investments in property, plant, and
equipment that fail to replace these assets on a systematic basis generally report
increasing returns on assets over the economic lives of the underlying assets. This
occurs because the denominator of ROA decreases with the sum of a company's
annual depreciation expense, resulting in a steady increase in the percentage
return on total profits. In addition, the general pattern of rising prices tends to
 6

increase the selling price of a company's products, resulting in a further increasing

bias for the ROA percentage.
Examination of the company's investment activity helps analyze its ROA
percentage's profit sustainability.
2.2 Cost Allocation
Cost allocation is the process of identifying, aggregating, and assigning
costs to cost objects. A cost object is any activity or item for which you want to
measure costs separately. Examples of cost objects are a product, a research
project, a customer, a sales region, and a department.
Cost allocation is used for financial reporting purposes to spread costs
among departments or inventory items. Cost allocation is also used in calculating
profitability at the department or subsidiary level, which in turn may be used as
the basis for bonuses or the funding of additional activities. Cost allocations can
also be used to derivate transfer prices between subsidiaries.
Capitalizing the cost of an asset implies that the asset has future service
potential. Future service potential indicates that an asset is expected to generate or
be associated with future resource flows. When these flows exist, the matching
concept implies that certain costs no longer have the potential to serve in the
future and should be treated as expenses over the period the related revenue is
earned. Because property, plant, and equipment costs are incurred to obtain future
benefits, they must be spread over, or allocated, to the benefited periods. The
process of recognizing or applying costs over several periods is known as cost
allocation. The cost allocation is referred to as depreciation for property, plant,
and equipment components. When an asset is depreciated, its cost is said to
expire, meaning the asset is expensed.
As discussed earlier, a statement of financial position measurement should
theoretically reflect an asset's future service potential at any given time.
Accountants generally agree that fees reflect the potential for future services at the
acquisition time. However, in subsequent periods, expectations regarding future
resource flows may change. In addition, the discount rate used to measure the
present value of potential future services may change. Consequently, the asset
may still be helpful. Still, due to technological changes, its future service potential
 7

at the end of a given period may differ from what was initially anticipated. The
systematic cost allocation method does not attempt to measure changes in
expectations or discount rates. Consequently, there is no systematic cost allocation
method that can provide a statement of financial position measure that
consistently reflects the potential for future services. The historical cost
accounting model currently dominant in accounting practice requires that the costs
incurred are allocated systematically and rationally. Thomas, who has conducted
extensive studies of cost allocations, concluded that all allocations are based on
arbitrary assumptions and that no cost allocation method is superior to another. At
the same time, it cannot be supposed that the current accounting model provides
information that is not useful for investors' decision-making. Several studies
document the relationship between accounting profit numbers and stock returns.
This evidence implies that historical cost accounting profit, which uses the cost
allocation method, has informational content.
 Allocation Methods
If a cost solely benefits one funding source, it should be charged entirely
to that funding source. If a cost benefits more than one funding source, it should
be assigned to each funding source in the same proportion it provides the user.
There are two methods for allocating a cost to multiple funding sources:
1) The Proportional Benefit Rule: when it is possible to determine the exact
benefit of the cost to each funding source, the cost is allocated according
to the proportion of use provided.
Example: A lab purchases 12 gallons of solution. Three gallons of solution
are used on Award A, 9 gallons on Award B. 25% (3/12) is charged to
Award A, and 75% (9/12) is charged to Award B.
2) The Interrelationship Rule: when it is not possible or cost-effective to
determine the exact allocation or use for each funding source, the cost is
distributed reasonably and rationally.
Example: A lab purchase syringes for use in experiments on two Awards.
It is impossible to tell in advance exactly how many needles will be used
for each Award, and it would not be cost-effective to track the use of each
needle. Instead, the lab allocates the cost of the syringes based on the
 8

effort the lab personnel who uses the syringes expends on each Award. If
the effort allocation is 70/30 on Awards A and B, the cost of the needles
would also be 70/30.
Costs may not be allocated based on the following:
1) Amount of available funds on an Award;
2) Budgetary convenience, e.g., accommodating an Award that is either over
or under budget;
3) Avoidance of restrictions on an Award; and
4) Offset where costs are charged to Award A one time and Award B the next
time.
2.3 Depreciation
Depreciation is allocating to expense the cost of a plant asset over its
applicable (service) life rationally and systematically. Cost allocation enables
companies to match expenses with revenues according to the expense recognition
principle.
Once the exact cost of an asset has been determined, the reporting entity
must decide how to allocate that cost. On the one hand. The entire cost of
acquiring an asset can be expensed when the asset is acquired, while on the other
hand, costs can be recorded in the accounting records until the disposal of the
asset occurs, when all costs will be expensed. However, neither of these
approaches provides a good measure of periodic earnings because the expiration
costs will not be allocated to the periods in which the asset is used and thus will
not comply with the matching principle. Therefore, the concept of depreciation is
designed to meet needs, namely allocating property, plant, and equipment costs
during periods that benefit from long-term assets.
The desire of users of financial statements to receive periodic reports on
the results of operations necessitates the allocation of the acquisition cost of assets
to the periods that receive benefits from the use of assets classified as property,
plant, and equipment. Because depreciation is a form of cost allocation, all
depreciation concepts are related to some view of the measurement of profit. The
strict interpretation of the FASB's comprehensive income concept requires that
service potential changes be recorded as revenue. Economic depreciation has been
 9

defined as the change in the discounted present value of the components of

property, plant, and equipment over a period. Suppose the discoucurrentesent
value measures an asset’s service potential at a given time. In that case, a change
in interpretation of the service potential is consistent with the concept of economic
profit. Recording fee expiration with changes in service potential is difficult to
operationalize. Consequently, accountants have adopted the view of determining
the profit of a transaction. They see profit as the ultimate result of revenue
recognition based on specific criteria, plus an appropriate match between the
related expenses and revenues. Thus, most depreciation methods emphasize the
matching concept, and little attention is paid to the statement of financial position
valuation. Shrinkage is usually described as a process of systematic and rational
allocation of costs that are not intended to result in the presentation of the fair
value of assets in the statement of financial position. This point was first
emphasized by the Committee on Terminology of the AICPA as follows:
Depreciation accounting is an accounting system systematically distributes
the cost or other underlying value of tangible capital assets, less residual value (if
any), over the estimated useful lives of the units (which may constitute groups of
assets) systematically and rationally. This is an allocation process. not a
judgment." [See FASB ASC 360-10-35-4.]
The AICPA view of depreciation is essential for understanding the
difference between accounting profit and economic profit concepts. It also
provides insight into many of the misconceptions regarding accounting
depreciation. Economists see depreciation as a decrease in the value of an asset in
real terms. At the same time, the other party believes that the resulting
depreciation expense and accumulated depreciation provide a source of funds for
asset replacement in the future. Other parties argue that business investment
decisions are influenced by some of the initial asset costs that have been
previously allocated. New investments cannot be made because the old assets
have not been fully depreciated. This view is inconsistent with the stated
depreciation objective for accounting purposes.
 10

2.3.1 Depreciation Process

The depreciation process for long-term assets consists of three different
factors. Namely:
1. Establish the depreciation basis.
2. Estimating useful economic life.
3. Choose the method of allocating costs.
a. Basic Depreciation
The depreciation basis is a portion of the asset’s cost, which must be
treated as an expense over its estimated useful life. Because cost represents the
future service potential of an asset in the future resource flow, the theoretical basis
for depreciation is the present value of all resource flows over the asset’s life until
the asset's disposition occurs. Therefore, the cost must be deducted from the
current value of the salvage value. In practice, the residual value is not discounted,
and as a practice, it is usually ignored. Proper accounting treatment requires that
the residual value be considered.
b. Useful Economic Age
The useful economic life of an asset is the period during which the asset is
expected to function efficiently. Consequently, the useful economic life of an
asset may be less than its physical life, and factors other than wear and tear must
be examined to determine the useful economic life. Several authors have cited
financial contingencies, shortages, replacements, and changes in the social
environment as factors to consider in deciding economic life estimates.
2.3.2 Depreciation Method
Much of the controversy in depreciation accounting revolves around
questions about the appropriate method to allocate the depreciation base over its
expected useful life. Theoretically, the asset's expiration cost should be related to
the value received from the asset in each period. However, it is tough to measure
this amount. Therefore, accountants need to work on estimating the expiration
cost of assets by other methods—namely, straight-line, accelerated, and unit-
activity.
a. Straight line
 11

The straight-line method allocates an equal portion of the depreciable cost

of an asset to each period in which the asset is used. Depreciation by the straight-
line method is often justified due to the lack of evidence to support other
processes. Because it is challenging to determine evidence linking the received
value of an asset to any specific period, proponents of the straight-line method of
depreciation accounting argue that other forms are arbitrary and tend to be
inappropriate. The straight-line method implies that an asset’s service potential is
impaired by the same amount over its estimated useful life.
b. Accelerated
Total year-digit sums and a fixed percentage of the declining base
(declining balance) are the most common accelerated depreciation methods."
These methods result in a more significant burden to be imposed in the early years
of an asset's life, even if it is less evidence to support the notion that assets do
decrease in service potential in the way this method suggests. Proponents argue
that accelerated depreciation is preferable to straight-line depreciation because, as
an asset age, a minor depreciation expense is associated with a higher
maintenance expense high. The resulting aggregated expense pattern matches the
related revenue streams better. The accelerated depreciation method may provide
a statement of financial position assessment that is closer to the actual value of the
asset in question than the straight-line method because most assets are lost n
appreciated more quickly during the early years of use. However, because
depreciation accounting is not intended as a method of valuing assets, this factor
should not be viewed as an advantage to the accelerated depreciation method.
c. Activity Units
When assets (e.g., machines) are used in the production process, it is
possible to define activity levels, such as the estimated total output obtained from
these assets. Depreciation can then be based on the number of output units
produced during the accounting period. The measure of activity depreciation
assumes that each product made during the existence of the asset receives the
same amount of benefit from the asset. This assumption may or may not be
realistic. In addition, care must be taken in developing direct relationships
between units of measurement and assets. For example, when direct labor hours
 12

are used as a measure of unit output, reduced productive efficiency in subsequent

years of asset use could lead to adding more direct labor hours per product, which
would result in charging more per unit cost.
2.3.3 Disclosure of Depreciation Methods
The vast majority of US companies use the straight-line depreciation
method, as shown by a recent survey which reported that 488 of the 600
companies surveyed used the straight-line depreciation method, at least for some
of the assets it owns." Both Hershey and Tootsie Roll use straight-line
depreciation for this purpose. Finance report.
2.4 Income and Capital Expenditures
Income is revenue that an individual or business earns in exchange for
providing a good or service or through investing capital. Income can come from
various sources and may be taxed at different rates, depending on the head. For
individuals, this is primarily in the form of a wage or salary, but pensions,
dividends, interest, and stock options are also sources of income.
The Income Statement is a company’s core financial statement showing its
profit and loss over time. The profit or loss is determined by taking all revenues
and subtracting all expenses from both operating and non-operating activities.
The income statement is one of three statements used in both corporate
finances (including financial modeling) and accounting. The statement displays
the company’s revenue, costs, gross profit, selling and administrative expenses,
other expenses and income, taxes paid, and net profit coherently and logically.
The statement is divided into periods that logically follow the company’s
operations. The most common periodic division is monthly (for internal
reporting), although certain companies may use a thirteen-period cycle. These few
statements are aggregated into total values for quarterly and annual results.
This statement is a great place to begin a financial model, as it requires the
least amount of information from the balance sheet and cash flow statement. Thus,
in terms of information, the income statement is a predecessor to the other two
core statements.
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2.4.1 Types of Capital Expenditures

The Internal Revenue Service (IRS) recognizes three types of business
expenses as capital expenditures. They are the following:
a. Business Startup Costs
Business startup costs are the initial funds spent on getting a business up
and running.
For example, when a small company is looking to start a new business in a
new city, it may spend money on market research, feasibility studies, or
environmental impact assessments.
Some business startup costs can be considered capital expenditures, while
others are counted as operating expenses.
Startup costs are categorized into capital expenditures or operating
expenses, depending on how long it takes to recover each specific cost through
future revenues.
Costs related to future revenues, such as buildings, patents, or machines,
are typically considered capital expenditures.
Meanwhile, costs unrelated to generating future revenues, such as rent,
advertising, or salaries, are considered operating expenses.

b. Business Assets
These are capital expenses made to acquire long-term assets that will be
used in business operations.
This may include land, buildings, vehicles, furniture, office equipment,
machinery, and franchise rights.
For instance, a company may purchase a fleet of vehicles to deliver its
products. The cost of the vehicles is a capital expenditure since it is a long-term
asset that will be used to generate income for the company.

c. Improvements
Improvements are capital expenses incurred to increase the value or
prolong the useful life of long-term assets.
This may include activities such as replacing a major part of some
equipment or making additions to an existing property.
 14

For example, a company renovates its office space so that a new division
can use it. In this case, the renovation cost would be considered a capital
expenditure since it will increase the value of the office space and prolong its
useful life.
2.4.2 Types of Income
1. Earned Income
This is the primary source of income. For most people in the world, this
would include salaries or the profits earned from their business. The problem with
salaries is that they can be difficult to increase. The growth of salary happens at
almost a fixed rate. Also, if a person wants to increase their salary income, they
often have to work more hours. As people get older, the possibility of increasing
the number of hours reduces. This is because the level of their physical fitness
decreases. This also means that their responsibilities towards their family and
society take up more of their time. Hence, it has been observed that salaried
income reaches a plateau when the person is in their middle ages. Post a certain
age, salary increments only cover the rate of inflation.
Also, it must be noted that salaried income is one of the world's most
highly taxed sources of revenue. In most developed nations, salaried income is
taxed at almost 50%! This means that once a person crosses a certain income
threshold, their motivation to earn income also reduces because of the high rate of
taxation.
2. Investment Income
This is the income that is generated by selling investments that were made
earlier. In simpler words, this represents an increase in the value of the investment
or capital gain as it is known in standard terms. For instance, if a person buys
shares and sells at a higher price or buys a house and sells it for a profit, the
difference is called capital gain. This income has no relation to the number of
hours worked. Also, this income is not received periodically. It keeps on accruing
over a while and is paid out when the investor decides to liquidate it. Also, this
type of income is more tax efficient than earned income. This is true only if the
investments have been held for an extended period. Most countries in the world
 15

separate long-term capital gains from short-term capital gains and tax them at a
lesser rate.
3. Passive Income
Passive income is another important source of income. It shares the
characteristics of earned income and investment income. Just like earned income,
it is paid for every period. However, the quantum of income does not depend upon
the number of hours invested. Instead, it depends upon the capital invested. This is
where passive income is similar to investment income. Typical examples of
passive income are rent, interest, and dividends, which are paid by shares and
debentures. The taxes on this type of income are also less than the earned income.
Some incomes, like dividends, are tax-free in the investor’s hands. For other
incomes like rent, there are tools such as depreciation, which can be used to lower
the income and, therefore, the tax payable.

2.5 IAS Recognition and Measurement

On 24 July 2014, IASB issued IFRS No. 9, "Financial Instruments
(Financial Instruments)." which replaced IAS No. 39, "Financial Instruments:
Recognition and Measurement (Financial Instruments: Recognition and
Measurement)." Criticism of IAS No. 39 states that the standard contains too
many different classification categories and associated impairment models. Many
of these implementation problems are related to the classification and
measurement of financial assets. After reviewing these criticisms, the IASB
decided that the most effective way to address the problem and improve the ability
of users of financial statements to understand information about amounts better,
improve timing, and apply future cash flows is to change the classification and
measurement categories used. Exist for financial assets. Work on IFRS No. 9
accelerated in response to the 2008 global financial crisis. Notably, interested
parties, including the G20, the Financial Crisis Advisory Group, and others,
reduced the recognition time for credit loss expenses, the complexity of various
impairment models, and credit holdings as an area to be considered by the IASB.
From $3 for labs in I IFRS No. 9 contains requirements for recognition and
measurement, impairment, recognition of financial instruments, and accounting
 16

hedge. The 2014 version of IFRS No. 9 supersedes all previous understandings
and is effective for periods beginning on or after January 1, 2018, subject to
earlier adoption approval (subject to mutually agreed terms). The IASB has
previously published a version of IFRS No. 9, which introduced new
classification and measurement requirements (in 2009 and 2010) and a new hedge
accounting model (in 2013). The publication made in July 2014 is the final
version of this standard, replacing IFRS version No. 9 previously, and completed
the IASB project to replace IAS No. 39. Following is a summary of its provisions
relating to financial assets.
2.5.1 Preliminary Measurement of Financial Instruments
All financial instruments will be initially measured at fair value, plus or
minus transaction costs, in the case of financial assets not measured at fair value
through profit or loss and other comprehensive income. Classification of financial
assets is carried out when the assets are initially recognized. Two criteria are used
to determine how financial assets should be classified and measured:
1. The entity's business model for managing financial assets.
2. Characteristics of contractual cash flows from financial assets.
2.5.2 Subsequent Measurement of Financial Assets
IFRS No. 9 classifies all financial assets into two measurement
classifications:
1. Financial assets are measured at amortized cost.
2. Financial assets measured at fair value.
When assets are measured at fair value, gains and losses are fully
recognized in the statement of profit or loss and other comprehensive income (fair
value through profit or loss and other complete income-Fair Value through Profit
or Loss-FVTPL) or recognized in comprehensive income. Additional (fair value
through other comprehensive income-FVTOCI). Certain assets are required for
debt instruments with FVTOCI classification unless the fair value option is
selected. For equity investments, the FVTOCI classification is an optional choice.
However, the requirements for reclassifying gains or losses recognized in other
comprehensive income are different for debt instruments and equity investments.
 17

The business model refers to how an entity manages its financial assets to
generate cash flow—by collecting contractual cash flows, selling financial assets,
or both. Financial assets are measured at amortized cost in a business model
where the objective is to own the assets that collect contractual cash flows.
Financial assets are classified and measured at FVTOCI under a business model
where the objective is achieved by collecting contractual cash flows and selling
financial assets. Any financial assets not held in either of these two business
models are measured at FVTPL. Financial assets held for trading and those
managed on a fair value basis are also included in this category. Equity
investments included in the scope of IFRS No. 9 need to be measured at fair value
in the statement of financial position, with changes in value recognized in the
statement of profit or loss and other comprehensive income, except for equity
investments that an entity has chosen to present changes in value in other total
income. Suppose a financial asset is a debt instrument, and the objective of the
entity's business model is to collect its contractual cash flows. In that case, the
financial asset is measured at amortized cost. All other debt instruments are
measured at fair value through profit or loss and other comprehensive income.
2.5.3 Fair Value Option
IFRS No. 9 contains an option to designate, on initial recognition, a
financial asset measured at FVTPL, even if the instrument meets the two
requirements to be measured at amortized cost or FVTOCI if doing so eliminates
or significantly reduces the measurement or recognition inconsistency (defined as
a mismatch accounting mismatch) that would otherwise arise from measuring an
asset or liability or recognizing its gains and losses on a different basis.
2.5.4 Other Comprehensive Income Options
Suppose the equity investment is not held for trading. In that case, an
entity may make an irrevocable choice at initial recognition to measure it at
FVTOCI only by dividend income recognized in the statement of profit or loss
and other comprehensive income.
2.5.5 Derecognition of Financial Assets
Criteria for derecognition in IFRS No. 9 requires an entity to determine
whether the assets being considered for derecognition are:
 18

 Assets as a whole, or
 Specifically identifiable cash flows from an asset (or a group of similar
financial assets), or
 An entirely proportionate cash flow share of an asset (or a group of similar
financial assets), or
 A specifically identifiable portion of the cash flows that is entirely
proportionate to a financial asset (or a group of similar financial assets).

Subsequently, after the asset being considered for derecognition has been
identified, a judgment is made as to whether the asset has been transferred and, if
so, whether the asset transfer subsequently qualifies for derecognition.
An asset is deemed to have been transferred if the entity has transferred the
contractual rights to receive cash flows or the entity has the contractual rights to
receive cash flows from the asset but has assumed a contractual obligation to
transmit those cash flows under an arrangement that satisfies the following three
conditions:
 The entity has no obligation to pay a specified amount to its ultimate
beneficiary unless it collects an equivalent amount in the original assets.
 Entities are prohibited from selling or pledging the initial assets (other
than as securities for the ultimate beneficiary).
 The entity has an obligation to deliver those cash flows without undue
delay.
Furthermore, once the entity determines that the asset has been transferred,
the entity must determine whether or not the asset has substantially transferred all
the risks and rewards of ownership. If substantially all the risks and rewards have
been moved, the asset is derecognized. If substantially all the risks and rewards
have been retained, derecognition of the asset is not permitted.
If the entity neither retains nor transfers substantially all the risks and
rewards of the asset, the entity must assess whether it has relinquished control of
the asset or not. If the entity does not control the asset, derecognition is deemed
appropriate. However, if the entity retains control of the asset, then the entity must
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still recognize the asset in question as long as its involvement in the asset
continues.

2.6 Case of Fixed Asset Accounting

BPK Calls There Was an Error in Trans Koetaradja Bus Operational Expenditure
Budgeting

The Supreme Audit Agency (BPK) of the Republic of Indonesia Aceh

Representative found an error in budgeting the operational expenditure of the
Trans Koetaradja Bus in the Equipment and Machinery Capital Expenditure
Budget.
The BPK RI Aceh Representative conveyed this in the Audit Results Report
(LHP) of the Aceh Government Financial Report for the 2021 fiscal year.
In the LHP Number: 21.A/LHP/XVIII.BAC/04/2022 the BPK stated that the
mistake in budgeting operational expenditure for the Trans Koetaradja Bus was in
the capital expenditure budget for equipment and machinery amounting to IDR
12,927,430,420.00 in the Fiscal Year (TA) 2021.
In 2021, the Aceh Transportation Agency (Dishub) has budgeted Capital
Expenditures of IDR 119,909,445,884.00 with a realization of IDR
32,970,274,393.07 (audited) or 27.50 percent.
"From the realized value of the capital expenditure, the realization of expenditure
on equipment and machinery was used in the amount of Rp. 12,927,430,420.00
for providing public transportation for services for the transportation of people
and/or goods between cities within one province," said the BPK in its report,
which AJNN also obtained.
BPK further stated that the activity was in the form of Trans Koetaradja bus
operations on five corridors (lanes) carried out by PT HIT and Perum D. These
activities were divided into five work contracts.
 20

The results of the examination of contract documents, payment documents, and

work progress reports stated that the work items that the executor of the work
package must carry out are as shown in the following table.

From this table, according to BPK, it is known that the work items carried out by
PT HIT and Perum D are operational activities of the Trans Koetaradja Bus which
should be charged according to the type of expenditure for each.
"Meanwhile, capital expenditure for equipment and machinery should be used to
budget for equipment and machinery including motorized machinery and vehicles,
electronic equipment, office inventory and other equipment with significant value
 21

and a useful life of more than 12 months and in ready-to-use condition," said BPK
in the LHP. -his.
According to the BPK, this condition is not by Government Regulation Number
12 of 2019 concerning Regional Financial Management in Article 55, Paragraph
(2) and Paragraph (3).
In addition, these conditions are not by Appendix III of Aceh Governor
Regulation Number 101 of 2018 concerning Aceh Government's actual-based
accounting policies in Policy 14. Expenditure Accounting which states that
operating expenditures are budget expenditures for daily activities that provide
short-term benefits. Operational expenditures include personnel expenditures,
goods and services expenditures, interest expenditures, subsidy expenditures,
grant expenditures, and social assistance expenditures.
Meanwhile, capital expenditures are budget expenditures for the acquisition of
fixed assets and other assets that benefit more than one accounting period. Capital
expenditures include, among others, capital expenditures for the acquisition of
land, buildings and buildings, equipment, and intangible assets, as well as
overhaul/renovations that meet the qualifications for capitalization as fixed assets.
According to BPK, this condition is also different from technical bulletin 04
concerning the presentation and disclosure of government spending point 2a of
the capital expenditure criteria.
According to the BPK, expenditure can be categorized as capital expenditure if,
firstly, the expenditure results in the acquisition of fixed assets or other assets,
thus increasing government assets.
"Second, these expenditures exceed the minimum capitalization limits for fixed
assets or other assets set by the government and thirdly, the acquisition of these
fixed assets is intended not for sale," wrote the BPK in its report.
According to the BPK, this resulted in the realization of the Aceh Transportation
Agency's capital expenditure not adding to the Aceh Government's fixed assets.
Then the realization of goods and services expenditures and capital expenditures
did not reflect the actual conditions, and the understatement of Goods and
Services Expenditure in the LRA and the overstatement of Capital Expenditure
each amounted to Rp. 12,927,430,420.00.
 22

According to the BPK, this is because TAPA is not optimal in verifying the draft
DPA and DPA Shifting SKPA. Second, when proposing the budget, the Aceh
Transportation Agency did not follow the provisions on guidelines for budgeting:
and third, this was also because the Aceh Financial Management Agency (BPKA)
budget department was not careful in verifying the spending budget on the SKPA
and had not guided the applicable provisions.
"Regarding this problem, the Government of Aceh through the Head of the
Transportation Service stated that it agreed with these findings and would be more
thorough and careful in budgeting so that the mistakes that occurred were not
repeated," said the BPK in its report. Regarding a number of findings detailed, the
BPK recommends to the Governor of Aceh that, firstly, order the Regional
Secretary (Sekda) as the Aceh Government Budget Team (TAPA) to be more
optimal in verifying the draft DPA and DPA SKPA Shifts.
Second, instruct the Head of the BPKA to take corrective steps in controlling the
SKPA budgeting by applicable regulations.
Third, Order the Head of the Aceh Transportation Service to propose a budget
according to the applicable regulations.
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CHAPTER III
CLOSING
3.1 Conclusion
Fixed assets refer to physical or tangible things of value that a company
owns, such as facilities, equipment, and land. The term "fixed assets" reflects the
traditional notion that these types of assets are fixed and do not require much
deliberation after purchasing them.
Companies benefit from fixed asset analysis by controlling their fixed
assets and maintaining their condition to ensure proper operation. Controlling
fixed assets allows companies to avoid losses related to misappropriated and
misplaced assets and damage.
Financial assets are measured at amortized cost in a business model where
the objective is to own assets that collect contractual cash flows. Financial assets
are classified and measured at FVTOCI based on a business model where the
objective is achieved by collecting contractual cash flows and selling financial
assets

3.2 Suggest
Suggestions regarding fixed asset accounting include:
 Make sure that in presenting the condition or changes in various assets and
equipment, accountants often prepare financial reports and schedules that
must be planned.
 In preparing this report, accountants generally determine the age and
condition of significant fixed assets and their replacement costs.
 Accountants can also compare ratios with industry averages to see how
their company uses their fixed assets against their competitors
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