Current Issue in Financial Accounting
Current Issues Convergence Disclosure Quality of Accounting Standard Development Accounting Standard
Benefits Cost efficiencies to business Greater safeguards to the public Investor able to rely on financial
information based on similar set of standards Greater economic expansion
Challenges in Achieving Convergence (Wong Report) Complexity and structure of the
international standards Standards becoming too long, complex and rule based Compliance and avoidance mentality Incorporation in national law or regulation
Challenges in Achieving Convergence (Wong Report) Translation
Need simple English Exposure draft periods to allow for translation
Frequency, volume and complexity of
changes Effect on SME
The international standards are not relevant and appropriate to SMEs and SMPs
Step to fully adopt Fully adopt ? Need for a proper full adoption plan
A transition period to remove existing differences gradually and give companies sufficient lead time to prepare for full adoption of IFRS Big bang approach: poses a thread to the short term quality of the application of new standards
Step to fully adopt Making process of adoption transparent Socialization of IFRS To increase the quality the quality of
financial reports should be accompanied by better infrastructures : corporate governance, audit quality
Illustration : The use of fair value IFRS tends to promote more use of fair
value (IAS 16: Property plant and equipment) Framework for relevant and reliable financial statements Issues in obtaining reliable measures based on fair value
Importance of Relevant and reliable Financial statement Sound Conceptual Framework Adherence to Conceptual Framework
High Quality Accounting Standard Relevant and Reliable Financial Statements
Independence Audit Quality Competence
Efficient Capital Market / Other Decision Quality of Information
Impacts of Information Asymmetry: 1. Adverse selection 2. Moral hazard
Relevance and Reliability Relevant : Information influences the economic
decisions of users by helping them evaluate past, present or future events or confirming or correcting their past evaluations
Fair value is considered more relevant than historical cost
Reliable : information is free from material error
and bias can be depended upon by users to represent faithfully that which it either purports or could reasonably be expected represent
Some issues arise with the use of fair value
Issues in obtaining reliable Lacks of markets : no observable transaction
amounts Estimates are produced by management so they may include “management induced” error Most information systems do not capture necessary data Measurement tools produce intrinsic errors Accountant lack expertise in using tools
Lack of markets Illiquid and or inefficient markets for financial
instruments
Stock market More than one third of listed stocks are not liquid (i.e., no transaction in more than 20% of transaction days) Empirical studies find that the market is not semi strong efficient – market price may not reflect market value Bond market : the majority of players are passive investors, resulting in illiquid bond market
Lack of markets Lack of markets for many physical items and
intangible items
The crucial role of competent and independent appraisers The comparison to the others counties, Indonesia has few appraisers (2001 number of app per 1 mill pop : Indonesia 6,7 ; China 10,6, ; Malaysia 21,5 ; Singapore 129.2) Three professional bodies exits : MAPPI, Indonesian Association of Business Appraisal and The Indonesian Association of appraisal Firms) MAPPI is member of ISVC (International Standard Valuation Committee)
Most information system do not capture necessary data Information systems tend to focus on
form specific transaction amounts while fair value measurements required data on transactions in which te reporting entity does not participate Indonesia :
Information systems of most Indonesian companies still traditional – backward looking
Intrinsic error in the Measurement tools (models) Simplifying assumptions in valuation models
introduce measurement error Estimated inputs some of which are forecasts and expectation are sure to contain some error Indonesia
Volatile business condition (economic and non economic factors) make forecasts / expectations even more difficult Limited external data (e.g. market and industry data)
Management induced error Bias – the purposeful introduction of fair
values measures that are used to achieve a desired financial reporting outcome that is not representationally faithful and not transparent Fraud – the purposeful introduction of fair value measures that do not comply GAAP To prevent: need effective governance (including internal control), auditing and enforcement)
Indonesia : Governance Surveys indicate that Indonesia ranks among
the lowest in its governance practice Much improvement have been done in recent years
Compulsory to have independent : commissioners / directors and audit committee Close monitoring by Bapepam on disclosure practice Greater protection of minority interest
Indonesia : Auditing In comparison to other countries, Indonesia has
relatively few number of public accountants To become a public accountant, one must pass highly rigorous education and training
Undergraduate in accounting, Accounting Profession education program Public accounting certification exam Compulsory continuing education
Plan to adopt International Auditing Standards Increased monitoring and increased sanction of
malpractice
Accountant lack of expertise in using tools Unreliable measures because lack of
understanding
Subject matter knowledge & specific skills
Historically, education of accountants
has tended to focus on allocation of transaction amounts, not measures techniques
Longterm solution Internal (accounting profession)
Continuous improvement of competency of accountants in the are of : information system, valuation models, internal and external audits and measurement techniques Higher
and continuing professional education
Improvement in the integrity of accountants Strict
enforcement of code of ethics
Longterm solution External (beyond accounting profession)
Improving governance practice (e.g. enforcing rules and publicly disclosing governance practice) Improving the competency and integrity of appraisal profession Increasing the liquidity and efficiency of capital markets Increasing availability of data for making projections
The Future of Accounting and Disclosure in an Evolving World: The Need for Dramatic Change
The utility of Financial Statement and Corporate Disclosure Usefulness to users :
Financial markets Managements Regulators Who have to make decisions base on financial information
Future accounting and disclosure issues Recognition and measurement of the
benefits and obligations of a business (what) The timelines of financial reporting (when) The concept of the firm (who) The distribution channel and medium (Where and how)
Recognition and Measurement Historical carrying amount intangible assets
Timelines Annual report and even quarterly report
do not capture and communicate material development in sufficient time to meet market informational need Timing and cost consideration
Concept of the firm Outer edge of companies :
Multiple public subsidiaries Joint ventures Licensing arrangement Others affiliation
Information distribution channels Developing computerized systems for
distributing this information Analysis of disaggregated data Allowing end user to retrieve and analyze the data for their own internal purposes
Implication and potential outcome Stratification of accounting information Neglecting to adequately the future
needs of an appropriate accounting system. Explore the issues and begin to design a flexible information systems.
Accounting Theory
Complexity of Information Information is powerfull and important
commodity
Unaninous in their reaction to information More effect than effect individual decisions Conflicting pressure from different groups with an interest in financial reporting
Adverse Selection
Rational Investment Decison
Full Disclosure
Value Based Accounting
Standard Setting
Moral Hazard Ideal Condition
Information Asymmetry
Manager Compensation, Debt Covenant
Hard net income
User decision Problem
Accounting Reaction
Mediation
The information Perspective and Decision Usefulness Usefulness of information = information
perspective on financial reporting. Research can help accountant to further increase usefulness by letting market response guide them as to what information is an is not valued by investor Information is complex commodity
Outline of the research problem Reason for market response Finding the market response Separating marketwide and firm specific
factors Comparing return an income
The Ball and Brown Study Tradition of empirical capital market
research. Security market price responded to the information content of financial statement
Announced earning Market expectation Abnormal return Earning level vs earning changes
Earning Response Coefficient ERC measures the extent of a security’s
abnormal return in response to unexpected component of reported earning of the firm issuing security. Beta Capital structure Persistance Earning quality Growth opportunity Informativeness of Price
Quality of Accounting Standard Based on logical theory Consider the stakeholder Consider the information perspective Applicable and easy to applied (cost and benefit
considerattion) Flexibility (accounting standards and accounting guidelines
Standar Akuntansi Keuangan di Indonesia Terdapat tiga tonggak sejarah dalam pengembangan
standar akuntansi di Indonesia (Ahmadi Hadibroto)
Menjelang diaktifkan Pasar Modal pada tahun 1973, dibentuk cikal bakal badan penyusun standar akuntansi yang menghasilkan “Prinsip Akuntansi Indonesia (PAI)” Komite PAI yang dibentuk tahun 1974 melakukan revisi mendasar PAI ’73 untuk menyesuaikan ketentuan akuntansi dengan dunia usaha. Hasil revisi ini dikodifikasi dalam “Prinsip Akuntansi Indonesia 1984” Pada tahun 1994, komite PAI melakukan revisi total terhadap PAI 1984. hasil revisi ini dikodifikasi dalam “Standar Akuntansi Keuangan (SAK) per 1 Oktober 1994
Standar Akuntansi Keuangan di Indonesia Selanjutnya periode 1994-1998, nama komite PAI
diubah menjadi komite Standar Akuntansi Indonesia (SAK). Mulai 1994, IAI memutuskan untuk melakukan harmonisasi dengan standar akuntansi internasional dengan melakukan revisi dua kali SAK 1994, yaitu pada 1 Oktober 1995 dan 1 Juni 1996 Pada periode 1998-2002, DSAK yang menggantikan komite SAK, melakukan dua kali revisi PSAK, yaitu revisi per 1 Juni 1999 dan 1 April 2002
Referensi Penyusunan PSAK Referensi
Jumlah
International Accounting Standards (IAS)
28
Disusun IAI sendiri
11
FASB Statement of Standards Statement Financial Accounting Standards
17
Accounting Principles Board Opinion
2
Accounting Research Bulletin
1
Total Nomor PSAK Sumber: Diolah dari Ikatan Akuntan Indonesia
59
Perbandingan IFRS dan PSAK (1) IFRS
PSAK S/d status 2006, terdiri 37 standar dan 20 interpretasi:
7 new standards IFRS 30 standar IAS 9 new Interpretation (IFRIC) 11 Interpretasi (SIC)
Dimulai sejak 1974 (IAS) Lebih merupakan standar
umum, hanya ada 4 standar khusus industri
S/d status 2006, PSAK s/d 2006, terdiri dari 59 standar dan 6 interpretasi, umumnya diadopsi dari IAS, namun beberapa menggunakan referensi SFAS.
Dikembangkan sejak 1994 (PAI) Ada banyak standar khusus industri (15 standar)
Menurut Ketua DSAK, khusus untuk 7 IFRS, sebenarnya hanya IFRS 1 yang belum diadopsi pengaturannya, sedangkan untuk 6 IFRS lainnya secara substansi sudah diatur dalam PSAK, walau masih ada beberapa perbedaan pengaturan di dalamnya.
Perbandingan IFRS dan PSAK (2) IFRS
PSAK 1.
Belum diadopsi.
2.
First time adoption of IFRS Share-based payment
2.
PSAK 53 belum adopsi IFRS 2, referensi menggunakan US SFAS 123.
3.
Business Combinations
3.
PSAK 22 belum mengadopsi IFRS 3, referensi menggunakan IAS 22 (1993).
4.
Insurance Contract
4.
PSAK 28 dan 36, belum adopsi IFRS 4, referensi menggunakan US SFAS dan regulasi industri asuransi.
1.
5. 6. 7.
Non-Current Assets Held for Sale 5. and Discontinued Operations Exploration for and Evaluation of 6. Mineral Resources Financial Instruments: Disclosures 7.
PSAK 58 belum adopsi IFRS 5, referensi menggunakan IAS 35 (1998). PSAK 29 dan 33, belum adopsi IFRS 6, referensi US SFAS dan regulasi industri PSAK 31 dan 55, belum adopsi IFRS 7, referensi menggunaka IAS 30, US SFAS dan regulasi industri.
Due Process Penyusunan Standar Identifikasi issue untuk dikembangkan menjadi standar Konsultasikan issue dengan DKSAK Membentuk tim kecil dalam DSAK Melakukan riset terbatas Melakukan penulisan awal draft Pembahasan dalam DSAK Peluncuran draft sebagai Exposure Draft dan Pengedarannya Public Hearing Pembahasn tanggapan atas ED dan public hearing Final Checking Persetujuan / Pengesahan ED PSAK menjadi PSAK Sosialisasi Standar
Due Process IASB – The Six Stages Stage 1: Setting the agenda Stage 2: Project planning Stage 3: Development and publication of a
discussion paper Stage 4: Development and publication of an exposure draft Stage 5: Development and publication of an IFRS Stage 6: Procedures after an IFRS is issued
Perbedaan yang Seringkali Muncul (Survey GAAP 2001) Hambatan konvergensi biasanya muncul atas beberapa isu akuntansi dan pelaporan keuangan berikut: • Pengakuan dan pengukuran: − financial assets and derivative financial instruments, − impairment losses, − provisions, − employee benefit liabilities, − income taxes;
• Akuntansi Penggabungan Usaha • Pengungkapan atas: − related party transactions, − segment information.
Beberapa isue Aturan hukum di Indonesia Aturan UU ketenagakerjaan tidak persis sama dengan IFRS Tantiem di BUMN/BUMD Disclosure PKBL Aturan NPL di financial institution Beberapa hal yang tidak diatur dalam standar : Syariah SME Koperasi Kuasi Reorganisasi
Kompleksitas IFRS
1/26/2010
IFRS 2 Share-based Payment IFRS 3 Business Combination IAS 12 Income taxes IAS 14 Segment Reporting IAS 32 Financial Instruments: Disclosure and Presentation IAS 36 Impairment of Assets IAS 39 Financial Instruments: Recognition and Measurement PwC Connected Thingking
47
Tantangan Akuntan di masa Mendatang Kompleksitas bisnis Tuntutan bahwa Akuntan harus berkualitas internasional Potensi Earning Management Penghargaan terhadap profesi akuntan di Indonesia RUU Akuntan Publik akuntan dapat dituntut dan
masuk penjara Auditor tidak hanya memeriksa bukti tetapi memeriksa potensi fraud dari bukti yang diterima Akuntansi Sektor Publik dan membutuhkan perhatian oleh akuntan
