Unofficial Translation

No. 70

STATEMENT OF FINANCIAL ACCOUNTING STANDARD

ACCOUNTING FOR TAX AMNESTY ASSETS AND

LIABILITIES

INDONESIAN INSTITUTE OF ACCOUNTANTS

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INTRODUCTION

PSAK 70 concerning Accounting for Tax Amnesty Assets and Liabilities was ratified by the Financial
Accounting Standards Board on 14 September 2016.

It is not compulsory to apply this Standard to immaterial items.

Jakarta, 14 September 2014

Financial Accounting Standards Board

Djohan Pinnarwan Chairman

Danil S. Handaya Vice Chairman
Patricia Vice Chairman
Lianny Leo Member
Kristianto Andi Handoko Member
Indra Wijaya Member
Singgih Wijayana Member
Friso Palilingan Member
Ersa Tri Wahyuni Member
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TABLE OF CONTENTS

Paragraph
INTRODUCTION……………………………………………………………………..01-05
Purpose …………………………………………………………………………………01
Scope………………………………………………………………………………….…02-04
Definitions……………………………………………………………………………….05

ACCOUNTING POLICIES ……………………………………………………………06-08

RECOGNITION AND MEASUREMENT……………………………………………09-17

Recognition ………………………………………………………………………………09
Measurement on initial recognition ……………………………………………………… 10-14
Measurement after initial recognition ……………………………………………………. 15-17

DERECOGNITION ………………………………………………….………………… 18

PRESENTATION……………………………………………………………………….19-21

DISCLOSURE………………………………………………………………………….…22-23

TRANSITIONAL PROVISIONS ………………………….……………………….… 24-25

EFFECTIVE DATE………………………………………………………………………. 26

BASES FOR CONCLUSIONS ……………………………………………….DK01 – DK17

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STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 70

ACCOUNTING FOR TAX AMNESTY ASSETS AND LIABILITIES

Statement of Financial Accounting Standard 70: Accounting for Tax Amnesty Assets and
Liabilities consists of paragraphs 01-26 and is complemented with Bases for Conclusions
which are not part of PSAK 70. All paragraphs in this Standard have the same regulatory
force. Paragraphs printed in bold italics stipulate the main principles. It is not compulsory to
apply this Standard to immaterial items.

INTRODUCTION

Purpose

01. The objective of this statement is to regulate the accounting treatment for tax amnesty
assets and liabilities in accordance with law Number 11 of 2016 concerning Tax Amnesty (“Tax
Amnesty Law”).

Scope

02. In determining whether an entity recognizes tax amnesty assets and liabilities in its
financial statements, the entity follows the provisions in the Tax Amnesty Law.

03. An entity applies the requirements in this Standard, if the entity recognizes tax amnesty
assets and liabilities in its financial statements.

04. This Standard may be applied by an entity that does not have significant public
accountability as defined in the Financial Accounting Standard for Entities without Public
accountability (SAK ETAP), if the entity recognizes tax amnesty assets and liabilities in its
financial statements.

Definitions

05. The following are the definitions of the terms used in this Statement:

Tax amnesty asset is an asset that arises from tax amnesty based on a Tax Amnesty Certificate

Acquisition cost of tax amnesty asset is the value of the asset based on the Tax Amnesty
Certificate.

Tax amnesty liability is a liability that is directly related to the acquisition of a tax amnesty
asset.

Tax amnesty is the cancellation of tax that should have been payable, without imposition of
tax administrative penalties and criminal penalties in the field of taxation, by disclosing assets
and paying redemption money as stipulated in the Tax Amnesty Law.
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Tax Amnesty Certificate (Certificate) is a letter issued by the Minister of Finance as evidence
of granting of tax amnesty. If within 10 working days from the date of receipt of a Letter of
Declaration of Assets for Tax Amnesty, the Minister of Finance or an official designated on
behalf of the Minister of Finance does not issue a Certificate, the Letter of Declaration of
Assets for Tax Amnesty is deemed to be a Certificate.

Letter of Declaration of Assets for Tax Amnesty (Asset Declaration Letter) is a letter that is
used by a Taxpayer to disclose assets, liabilities, net value of assets, and calculation and
payment of redemption money.

Redemption money is a sum of money that is paid to the state treasury to receive tax amnesty.

ACCOUNTING POLICY

06. At the time of issuance of a Certificate, an entity, in its statement of financial

position1:
(a) recognizes tax amnesty assets and liabilities, if the recognition of such assets and liabilities
is required by the Financial Accounting Standards;
(b) does not recognize certain items as assets and liabilities, if the Financial Accounting
Standards do not permit recognition of such items; and
(c) measures, presents, and discloses tax amnesty assets and liabilities in accordance with the
Financial Accounting Standards.

07. Apart from the provision in paragraph 06, this Standard provides the option for an
entity to measure, present, and disclose tax amnesty assets and liabilities in accordance with
the provisions in paragraphs 10-23.

08. An entity applies the accounting policy option it has chosen consistently for all tax
amnesty assets and liabilities that are recognized.

RECOGNITION AND MEASUREMENT

Recognition

09. An entity recognizes tax amnesty assets and liabilities, if the recognition of the assets
and liabilities is required by the Financial Accounting Standards. An entity does not recognize
certain items as assets and liabilities if the Financial Accounting Standards do not allow
recognition of those items.

Measurement on Initial Recognition

1
An entity that prepares its financial statements in accordance with SAK ETAP follows the provisions on
recognition, measurement, presentation and disclosure of tax amnesty assets and liabilities as required in SAK
ETAP paragraph 9.3.
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10. A tax amnesty asset is measured at the acquisition cost of the tax amnesty asset as
defined in paragraph 05. The acquisition cost of the tax amnesty asset is a deemed cost and
serves as the basis for the entity in performing measurement after initial recognition in
accordance with paragraph 15.

11. A tax amnesty liability is measured in the amount of the contractual obligation to deliver
cash or cash equivalent to settle the liability that is directly related to acquisition of a tax amnesty
asset.

12. An entity recognizes the difference between tax amnesty assets and tax amnesty liabilities
in equity in the additional paid-in capital account. This amount may not be recognized as realized
profit and loss or reclassified to retained earnings.

13. An entity recognizes redemption money that is paid in the profit and loss in the period
when the Certificate is submitted.

14. An entity makes adjustments to the balance of claims, deferred tax assets, and provision
in the profit and loss in the period when the Certificate is submitted in accordance with the Tax
Amnesty Law as a consequence of loss of rights that had been recognized as claims for tax
overpayment, deferred tax assets, and accumulation of tax loss that has not been compensated,
and provision for tax before applying this Standard.

Measurement after Initial Recognition

15. Measurement after initial recognition of tax amnesty assets and liabilities refers to the
relevant Financial Accounting Standards, including but not limited to 2:
(a) Investment property, in accordance with PSAK 13: Investment Property.
(b) Inventory, in accordance with PSAK14: Inventory.
(c) Investment in associate entities and joint ventures, in accordance with PSAK 15: Investments
in Associated Entities and Joint Ventures.
(d) Fixed assets, in accordance with PSAK 16: Fixed Assets.
(e) Intangible assets, in accordance with PSAK 19: Intangible Assets.
(f) Financial instruments, in accordance with PSAK 55: Financial Instruments: Recognition and
Measurement.

16. An entity is allowed, but not required, to remeasure tax amnesty assets and liabilities
based on fair value in accordance with the Financial Accounting Standards on the date of the
Certificate. The difference from remeasurement between the fair value on the Certificate date
and the acquisition cost of the tax amnesty assets and liabilities that was previously recognized,
is adjusted in the balance of additional paid-in capital. The value from the result of
remeasurement serves as the new basis for the entity in applying the provision on measurement
after initial recognition in accordance with paragraph 15.

2
An entity that prepares its financial statements in accordance with SAK ETAP follows the provisions on subsequent
recognition as required in SAK ETAP.
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17. If an entity concludes that the tax amnesty causes the entity to obtain control over an
investee in accordance with PSAK 65: Consolidated Financial Statements, the entity is required
to, during the period of remeasurement, remeasure the tax amnesty assets and liabilities as at the
Certificate date. The period of remeasurement starts after the date of the Certificate until 31
December 2017. In the case that the investee is not an entity under common control, the entity
applies the measurement provisions in PSAK 22: Business Combinations on the date of the
Certificate. If the investee is an entity under common control, the entity applies the measurement
provisions in PSAK 38: Business Combinations of Common Control Entities on the date of the
Certificate. An entity applies the consolidation procedure in accordance with PSAK 65
paragraphs PP86-PP88 after performing the remeasurement. From the date of the Certificate
until the period before the entity applies the consolidation procedure in accordance with PSAK
65, the entity is required to measure investment in subsidiaries using the cost method. The
difference in remeasurement between the fair value on the Certificate date and the value that was
recognized previously is adjusted in the balance of additional paid-in capital.

DERECOGNITION

18. An entity applies the derecognition criteria for each tax amnesty asset and liability in
accordance with the provisions in the Financial Accounting Standards for each type of asset and
liability.

PRESENTATION

19. Tax amnesty asset and liabilities are presented separately from other assets and liabilities
in the statement of financial position, if the entity chooses the accounting policy in accordance
with paragraph 07 but does not apply paragraphs 16 and 17. If the entity presents current assets
and non-current assets and short-term and long-term liabilities as separate classifications in its
statement of financial position, the entity may present separately current and non-current tax
amnesty assets and short-term and long-term tax amnesty liabilities if, and only if, the entity has
sufficient information to perform such separation of classification. If the basis for separation of
classification is arbitrary, the entity presents the tax amnesty assets and liabilities as part of the
non-current assets and long-term liabilities in the statement of financial position.

20. An entity reclassifies tax amnesty assets and liabilities, which were previously presented
in accordance with paragraph 19, in the similar asset and liability accounts, when:
(a) the entity remeasures the tax amnesty assets and liabilities in accordance with paragraph 16;
or
(b) the entity obtains control over an investee in accordance with paragraph 17.
The entity re-presents the closest previous financial statements, only if the date of the financial
statements is after the date of the Certificate.

21. An entity does not perform offset between tax amnesty assets and liabilities.

DISCLOSURE
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22. An entity discloses, in its financial statements, the date of the Certificate and the
amount recognized as tax amnesty assets based on the Certificate, as well as the amount of tax
amnesty liability.

23. An entity uses its discretion in disclosing accounting policies and estimates, as well as the
details of carrying amounts that have a significant impact on the financial statements to produce
relevant and reliable information.

TRANSITIONAL PROVISIONS

24. An entity applies the provisions in PSAK 25: Accounting Policies, Changes in
Accounting Estimates, and Errors paragraphs 41-53, if the entity chooses the accounting
policy in accordance with paragraph 06.

25. An entity applies the requirements in this Standard prospectively, if the entity chooses
the accounting policy in accordance with paragraph 07. Financial statements for periods
before the effective date of this Standard do not need to be re-presented.

EFFECTIVE DATE

26. This Standard is effective from the date of ratification of the Tax Amnesty Law.

BASES FOR CONCLUSIONS

These bases for conclusions complement, but are not a part of, PSAK 70.

Scope

DK01. To support the Government’s programs through increased tax revenues and as part of
the responsibility mandated to the Financial Accounting Standards Board of the Indonesian
Institute of Accountants (DSAK IAI) as the board that prepares the financial accounting
standards prevailing in Indonesia, on 14 September 2016 DSAK IAI ratified PSAK 70 to provide
regulation on the accounting treatment for tax amnesty assets and liabilities.

DK 02. DSAK IAI decided to issue regulation on the accounting treatment for tax amnesty
assets and liabilities in the form of a Statement of Financial Accounting Standard (PSAK)
because this regulation provides a special option with regard to measurement of and presentation
of tax amnesty assets and liabilities which differs from the provisions in the other PSAK.
Therefore, the regulation of this special option cannot be issued through an Interpretation of
Financial Accounting Standard (ISAK) or a Technical Bulletin (Bultek). An ISAK is issued to
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provide interpretation of a PSAK, while a Bultek is issued to provide certain technical guidance
on accounting. ISAK and Bultek cannot stipulate new measurement principles that are not
stipulated in a PSAK.

DK03. The accounting treatment for tax amnesty assets and liabilities for entities without
significant public accountability may refer to SAK ETAP paragraph 9.3 SAK ETAP paragraph
9.6 also allows an entity without significant public accountability to consider the requirements
and guidance of other SAK for similar and related issues. Therefore, PSAK 70 provides a
confirmation in paragraph 04 that an entity without significant public accountability may apply
the regulation in PSAK 70 if such entity recognizes tax amnesty assets and liabilities in its
financial statements. In addition, PSAK 70 paragraphs 06 and 15 provide footnotes to confirm
that an entity that uses SAK ETAP must comply with the regulation in SAK ETAP. In substance,
these footnotes are an amendment to SAK ETAP. However, considering the limited time for
issuance of PSAK 70, the amendment of SAK ETAP cannot yet be issued.

Recognition and Measurement

DK04. PSAK 70 provides an option for an entity to apply the regulation on initial
measurement in other SAK that are relevant to each asset and liability. However, there are
situations where it is impractical to determine the fair value of such assets and liabilities on their
acquisition date without using information available at the present time (hindsight). Therefore,
this Standard provides an option for an entity, at the time of initial recognition, to measure tax
amnesty assets at the amount of the acquisition cost by referring to the value specified in the
Certificate and to measure liabilities in the amount of the contractual obligation to deliver cash or
cash equivalent to settle liabilities that are directly associated with the acquisition of tax amnesty
assets. As an analogy, there is a similar option for alternative measurement in PSAK 61:
Accounting for Government Grants and Disclosure of Government Aid paragraph 23, whereby
an entity is allowed to measure non-monetary government grants using alternative measurement
based on the nominal amount, and not based on the fair value of the non-monetary grant asset.

DK05. There were comments from the public which proposed that PSAK 70 delete the
accounting policy option as stated in paragraph 06 as it could potentially lead to different
conclusions. DSAK IAI reached the conclusion to retain the option in paragraph 06 on the
considerations that: a) the option is consistent with the provisions on measurement, presentation,
and disclosure in the SAK, b) the existence of the option provides more benefit when compared
with the comparability between one entity and another, and c) the lack of the option in paragraph
06 would lead to unnecessary permanent differences in the measurement of assets and liabilities
for certain entities which are also required to prepare financial statements in financial reporting
frameworks other than SAK (e.g. IFRS), while the provision on recognition of the assets and
liabilities is the same, both in SAK and in the other financial reporting frameworks.
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DK06. There were also public comments which proposed that the difference between tax
amnesty assets and liabilities be recognized in retained earnings, as stipulated in the Tax
Amnesty law. DSAK IAI continues to require that the difference between tax amnesty assets and
liabilities be recognized in additional paid-in capital. Assets and liabilities arising from tax
amnesty can be considered analogous to contributions from or distributions to shareholders. An
increase or decrease in such assets and liabilities is not income or expense for the entity during
that period, so the transaction is treated as an equity transaction. Because retained earnings
reflect the total cumulative performance of an entity, an increase or decrease which arises from
an equity transaction is not presented in retained earnings. In addition, Article 2 paragraph 3 of
Minister of Finance Regulation Number 119/PMK.08/2016, which is one of the implementing
regulations of the Tax Amnesty Law, confirms that additional assets and liabilities that are
reported or set forth in a Letter of Declaration of Assets or a Certificate are treated as acquisition
of new assets and liabilities. In accounting terms, these transactions are transactions of the owner
in its capacity as owner. Based on this consideration, the difference between the value of assets
and liabilities that arise from tax amnesty is recognized in equity (not in retained earnings) in
accordance with PSAK 1: Presentation of Financial Statements paragraph 109.

DK07. DSAK IAI also received comments which proposed that measurement after initial
recognition of tax amnesty assets and liabilities should remain in accordance with the initial
acquisition costs of the tax amnesty assets and liabilities and that fixed assets not be depreciated
as required in the Tax Amnesty Law. DSAK IAI is of the opinion that this proposal conflicts
with the principle of measurement of assets, i.e. in the recoverable amount, after considering
factors of depreciation and impairment of the assets. The option in paragraph 07 is provided as
an exception for initial measurement.

DK08. In the case that an entity decides, after initial recognition, to perform a remeasurement
of tax amnesty assets and liabilities based on fair value in accordance with SAK on the
Certificate date, the entity creates a new basis for measurement of the tax amnesty assets and
liabilities based on the fair value measurement criteria in accordance with SAK. The entity may
perform remeasurement to represent new information obtained concerning the facts and
circumstances existing at the time of the issuance of the Certificate and, if known, that have
affected the measurement of the amount recognized on that date. The difference from
remeasurement is adjusted into the balance of additional paid-in capital that was previously
recognized by the entity. The Tax Amnesty Law allows fair value of assets to be determined
based on the entity’s calculation or estimate, such that the fair value set forth in the Certificate
may not be in accordance with the fair value based on SAK. Therefore, DSAK IAI provides an
option for an entity to be able to perform remeasurement of tax amnesty assets and liabilities in
accordance with fair value that is required by SAK, so that the entity reclassifies the tax amnesty
assets and liabilities to the same asset and liability accounts. The remeasurement and re-
presentation of tax amnesty assets and liabilities starts from the date of the Certificate because
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based on the implementing regulations of the Tax Amnesty Law, these additional assets and
liabilities are treated as acquisition of new assets.

DK09. An entity that after performing tax amnesty obtains control over an investee is
required to remeasure the investment in the investee on the date of the Certificate based on
PSAK 65: Consolidated Financial Statements. The remeasurement of the investment in the
investee and implementation of the consolidation procedure must be done simultaneously by the
entity with a time period up to 31 December 2017 on the consideration that based on the Tax
Amnesty law, the tax amnesty period ends on 31 March 2017. Therefore, DSAK IAI provides
some time leeway for an entity until 31 December 2017. Because the remeasurement period is
felt to be quite short and the figure set forth in the Tax Amnesty Certificate is the acquisition
cost, the entity applies the cost method in measuring the balance of investment in subsidiaries
from the Certificate date until the period before the entity remeasures the investment in the
investee and applies the consolidation procedure in accordance with PSAK 65 paragraphs PP86-
PP88 (i.e. for the period before 1 January 2018).

DK10. DSAK IAI received comments which proposed that the redemption money paid by an
entity be recognized in equity so that it does not affect the entity’s performance. In addition,
there were also other comments which proposed that the right to claims for tax overpayment an
accumulated tax loss that has not been compensated which must be written off in the context of
tax amnesty be adjusted in the retained earnings because these rights could potentially have a
material value for the entity’s profit.

DK11. Redemption money is an amount of money that is paid to the state treasury to receive
tax amnesty, which is calculated by multiplying a certain tax rate by the redemption money
assessment base, i.e. the difference between the value of assets less the debt which is set forth in
the Certificate. The redemption money that is paid for tax amnesty is outside the scope of PSAK
46: Income Taxes, because it is not imposed on taxable profit in accordance with the provisions
in PSASK 46. The accounting treatment for redemption money refers to PSAK 57: Provision,
Contingent Liabilities and Contingent Assets because the redemption money derives from
multiplying a certain rate in accordance with the Tax Amnesty law by the net value of assets.
Therefore, the redemption money is recognized in profit and loss in the period when the
Certificate is submitted and is not presented in the tax expense account in the statement of profit
and loss and other comprehensive income as intended in PSAK 1: Presentation of Financial
Statements paragraph 82(d).

DK12. In accordance with the provisions in the Tax Amnesty Law, an entity loses its rights
to claims for tax overpayment and for accumulated tax losses that have not been compensated
when the entity submits the Certificate [translator’s note - sic! should be Declaration Letter].
The loss of rights to claims for tax overpayment and for accumulated tax losses that have not
been compensated is not an acquisition cost of assets. In addition, this is not a transaction with
shareholders, so it is not an equity transaction. The loss of these rights is triggered by the entity’s
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decision to follow the provisions in the Tax Amnesty Law, so it does not relate to revaluation of
the entity’s tax position for claims for tax overpayment and accumulated tax losses that have not
been compensated before the period of submission of the Certificate. Thus, the loss of these
rights is not an error in the previous period as defined in PSAK 15: Accounting Policies,
Changes in Accounting Estimates, and Errors, so the impact is recognized in profit and loss in
the period of submission of the Certificate. In the event that the claims relate to current taxes as
defined in PSAK 46: Income Taxes paragraphs 05 and 12, the adjustment to the balance of
claims for current taxes follows the provisions on recognition, derecognition, and disclosure in
PSAK 46. The accounting treatment for deferred tax assets that are recognized for accumulated
tax losses that have not been compensated also follows the provisions in PSAK 46. If a claim for
tax overpayment relates to another type of tax that does not fulfil the definition of income tax in
accordance with PSAK 46, the entity follows the provisions on change or cancellation of
provision in PSAK 57: Provisions, Contingent Liabilities, and Contingent Assets.

DK13. In line with DK12, the loss of estimated liabilities associated with tax provision that
has been recognized by an entity in the period before the Certificate is triggered by the entity’s
decision to follow the provisions in the Tax Amnesty Law, so it does not relate to revaluation of
the estimated liabilities. Derecognition of these estimated liabilities does not indicate any errors
in the previous period, as defined in PSAK 25, in the entity’s analysis of uncertainty of its tax
position in previous periods. In the case that the estimated liabilities relate to current taxes as
defined in PSAK 46, the entity applies the provisions on recognition, derecognition, and
disclosure in PSAK 46. If the estimated liabilities relate to other types of taxes that do not fulfil
the definition of income taxes in accordance with PSAK 46, the entity applies the provisions on
change or cancellation of provision in PSAK 57: Provisions, Contingent Liabilities, and
Contingent Assets.

Presentation

DK14. In the case that an entity chooses the option to, at the time of initial recognition,
measure the assets and liabilities arising from tax amnesty in accordance with the provision in
paragraph 07, there is a possibility that the assets and liabilities will be measured on a different
basis from other similar assets and liabilities. Therefore, the tax amnesty assets and liabilities are
presented separately from other assets and liabilities in the statement of financial position.

DK15. If each tax amnesty asset and liability, at the time of initial recognition, is measured in
accordance with SAK, then each such asset and liability may be presented with other similar
assets and liabilities, because the assets and liabilities have been measured on the same basis. If
the entity chooses to remeasure tax amnesty assets and liabilities based on fair value in
accordance with SAK on the date of the Certificate, starting from the following day from the
date of the Certificate, the entity performs reclassification of the tax amnesty assets and liabilities
that were previously presented separately from the other similar assets and liabilities.
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DK16. Similarly, if tax amnesty assets and liabilities are derecognized or disposed, such that
each asset and liability arising from the derecognition or disposal has been measured in
accordance with the relevant SAK, the entity may perform reclassification of the tax amnesty
assets and liabilities that were previously presented separately from other similar assets and
liabilities.

Disclosure

DK17. PSAK 70 requires an entity to present the total aggregate amount of tax amnesty
assets and liabilities separately from other assets and liabilities in accordance with paragraph 19,
so the components of tax amnesty assets and liabilities vary greatly from one entity to another. In
addition, there is also a possibility of application of different accounting policies, for example
with regard to measurement at initial recognition, for the types of assets and liabilities that are
the same but do not arise from tax amnesty. Therefore, PSAK 70paragraph 23 does not
specifically describe the items that must be disclosed by an entity. Management must use its
discretion in disclosing accounting policies and estimates, and the details of carrying amounts
that have a significant impact on the financial statements by referring to other relevant SAK to
produce information that is relevant and reliable.