Starting in 2027, companies in Indonesia will use a different format for presenting their financial statements. The change follows the implementation of Statement of Financial Accounting Standards (PSAK) 118 on Presentation and Disclosure in Financial Statements.
PSAK 118 replaces PSAK 201 and adopts IFRS 18 Presentation and Disclosure in Financial Statements. The standard applies to all entities using General Financial Accounting Standards (SAK), including listed and publicly traded companies under the supervision of the Financial Services Authority (OJK).
The most visible change is in the statement of profit or loss. PSAK 118 classifies income and expenses into five categories: operating, investing, financing, income taxes, and discontinued operations.
Previously, users could find different types of income and expenses presented differently across companies. PSAK 118 introduces a more structured format, allowing users to better understand where a company’s performance comes from.
The operating category covers income and expenses related to a company’s main activities. The investing category covers returns from investments, while the financing category includes income and expenses related to financing activities.
The two remaining categories are income taxes and discontinued operations. For companies whose main activities involve investing or providing financing to customers, income from those activities may be classified as operating income.
Operating Profit
These classification changes are directly linked to how companies present their performance in the statement of profit or loss.
PSAK 118 requires certain subtotals to be presented, including operating profit or loss and profit or loss before financing and income taxes. This structure allows operating results to be viewed separately from investing and financing activities.
In simple terms, the statement of profit or loss starts with revenue. After deducting the cost of sales, the company arrives at gross profit. Gross profit is then adjusted for operating income and expenses to arrive at operating profit or loss.
Income and expenses classified as investing and financing activities are then taken into account in accordance with PSAK 118. The calculation continues with income tax to arrive at profit or loss for the period.
The changes do not necessarily mean that a company’s economic performance has changed. In some cases, only the classification and presentation may change. Investors therefore need to pay attention to differences in the structure of financial statements when comparing company performance before and after the implementation of PSAK 118.
For example, interest income from deposits or financial instruments must be classified based on the nature and source of the activity. The same applies to other income and expenses, which must be assigned to the appropriate category under the standard.
Performance Measures
PSAK 118 does not only change the structure of the statement of profit or loss. The standard also regulates disclosures concerning management-defined performance measures (MPMs), which are performance measures defined by management outside the subtotals required by the standard.
Companies will need to explain these performance measures in their financial statements so that users can understand the basis management uses to assess financial performance.
This requirement means information that may previously have been communicated through corporate communications will need to be more clearly reflected in the financial statements. Users will not only see the figures but also understand how management uses particular measures to describe the company’s performance.
System Preparation
The changes extend beyond the format of financial statements. Companies will also need to adjust their information systems and accounting processes.
Systems must be able to identify, collect, and classify transactions according to the new categories. Data previously sufficient to prepare financial statements under PSAK 201 may not immediately meet the requirements of PSAK 118.
Preparation also involves comparative data. PSAK 118 is applied retrospectively, meaning companies will need to prepare prior-period information in a format consistent with the new standard.
Data for 2026 will be important because it will be used as comparative information when the 2027 financial statements are presented. Adjusting systems and data may take time, particularly for companies with complex transactions and business structures.
As a result, preparation cannot be left until just before the implementation deadline. Companies need to map their transactions, determine their classifications, adjust their systems, and ensure historical data is available.
Investor Adaptation
For investors, the biggest change will be how they read and compare statements of profit or loss. Financial statements prepared after the implementation of PSAK 118 will have a different structure from those of previous periods. Changes in figures within certain categories do not necessarily reflect changes in a company’s economic activities, as some may result from reclassification.
Investors need to distinguish changes in economic performance from changes in accounting presentation. Comparisons between financial statements before and after 2027 should also take into account comparative information that has been restated in accordance with PSAK 118.
PSAK 118 was issued on May 28, 2025, and is effective for annual reporting periods beginning on or after January 1, 2027.
For companies, the two years leading up to implementation serve as a period to prepare their systems, data, and reporting processes. For investors, the change will require adjustments in how they read statements of profit or loss, particularly when assessing a company’s operating, investing, and financing performance.
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