IKATAN AKUNTAN INDONESIA DEWAN STANDAR AKUNTANSI KEUANGAN (THE INDONESIAN FINANCIAL ACCOUNTING STANDARDS BOARD)

Transcription

1 No : 0068/DSAK-IAI/II/2014 Jakarta, 3 February 2014 Mr. Hans Hoogervorst Chairman International Accounting Standards Board 30 Cannon Street London EC4M 6XH UNITED KINGDOM Dear Mr. Hoogervorst, Invitation to Comment: IASB ED/2013/10 IAS 27: Equity Method in Separate Financial Statements The Indonesian Financial Accounting Standards Board (DSAK IAI) as part of the Indonesian Institute of Accountants is the national accounting standard-setter in Indonesia. DSAK IAI is a proud member of the Asian-Oceanian Standards-Setters Group (AOSSG), and an active contributor in among others the EEG, WSS, and IFASS forum. DSAK IAI welcomes and appreciates the opportunity to contribute to the discussion on the IASB ED/2013/10 IAS 27: Equity Method in Separate Financial Statements. In general, DSAK IAI supports IASB s efforts in considering relevant request from users of IFRS. Please find our detailed comments to the questions are set out in the Appendix. Thank you for your kind attention and consideration, and please do not hesitate to contact us should you have any queries. With best regards, Rosita Uli Sinaga Chairperson The Indonesian Financial Accounting Standards Board Page 1

2 APPENDIX COMMENTS TO THE IASB ED/2013/10 IAS 27: EQUITY METHOD IN SEPARATE FINANCIAL STATEMENTS General Comments 1. In general, Indonesia local regulation does not prescribe the specific accounting for investment in subsidiary, associates, and joint venture in separate financial statement. The accounting treatment for this transaction follows the Indonesian Financial Reporting Standard, which is based on IFRS. 2. We acknowledge that applying retrospective application will promote comparability of the financial statement. However, considering the timing, cost, and complexity that might arise in retrospective application, it might be impracticable to apply retrospective application. Therefore, we recommend IASB to consider prospective application. 3. The Exposure Draft proposes consequential amendments to IAS 28 to require the remeasurement of any retained interests to fair value upon the loss of control. We do not believe that the principle of a re-measurement gain should be applied in separate financial statement and do not support the consequential amendments. Page 2

3 1. USE OF EQUITY METHOD Question 1 Use of the equity method Do you agree with the inclusion of the equity method as one of the options? If not, why? Entities in Indonesia is prohibited to prepare an entity s separate financial statements (the SFS ). However, the parent only financial information of the SFS can be presented as additional information attached to the consolidated financial statements. As the Indonesia entity is taxed on entity basis, the information in the SFS is useful to calculate corporate income tax. Although we are not convinced by the merit of restoring the use of the equity method as one of the options to account for investments in subsidiaries, joint ventures and associates in the SFS to the quality of the information, we do not object to the Board s proposal in doing so. Page 3

4 2. TRANSITION PROVISION Question 2 Transition provisions The IASB proposes that an entity electing to change to the equity method would be required to apply that change retrospectively, and therefore would be required to apply IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Do you agree with the proposed transition provisions? If not, why and what alternative do you propose? We acknowledge that applying retrospective application will promote comparability of the financial statement. However, considering the timing, cost, and complexity that might arise in retrospective application, it might be impracticable to apply retrospective application. This is because, in practice, the carrying amount of the investment in the separate financial statement may not be available in the consolidated financial statement, due to differences that might arise from separate financial statement and the consolidated financial statement. Therefore, we recommend IASB to consider prospective application and allow entities that opt to use the equity method to account for their investments in subsidiaries at the beginning of the immediately preceding period at an amount which corresponds to the net asset amount in the consolidated financial statements. Otherwise, we suggest that the Board include appropriate transition guidance to reporting entities to apply the requirements of the exposure draft to retrospectively apply the exposure draft as is currently proposed. Page 4

5 3. FIRST TIME ADOPTER Question 3 First-time adopter The IASB does not propose to provide any special relief for first-time adopters. A first-time adopter electing to use the equity method would be required to apply the method from the date of transition to IFRSs in accordance with the general requirements of IFRS 1: First-time Adoption of International Financial Reporting Standards. Do you agree that a special relief is not required for a first-time adopter? If not, why and what alternative do you propose? Consistent with our response in question no.2, considering the timing, cost, and complexity that might arise in applying the equity method in the separate financial statement for first-time adopter, we recommend IASB to consider providing special relief for first-time adopters. Page 5

6 4. IAS 28 AMENDMENT Question 4 Consequential amendment to IAS 28 Investments in Associates and Joint Ventures The IASB proposes to amend paragraph 25 of IAS 28 in order to avoid a conflict with the principles of IFRS 10 Consolidated Financial Statements in situations in which an entity loses control of a subsidiary but retains an ownership interest in the former subsidiary that gives the entity significant influence or joint control, and the entity elects to use the equity method to account for the investments in its separate financial statements. Do you agree with the proposed consequential amendment? If not, why? The Exposure Draft proposes consequential amendments to IAS 28 to require the remeasurement of any retained interests to fair value upon the loss of control. We do not believe that the principle of a re-measurement gain should be applied in separate financial statement and do not support the consequential amendments.. Page 6

7 5. OTHER COMMENT Question 5 Other comments Do you have any other comments on the proposals?? We have no other comments on the proposal. ***** END OF APPENDIX ***** Page 7