Reporting Currency SFAS No.

52

CONTENTS

Paragraph

Objective 01

Scope 02

Definitions 03

Recording and Reporting currency 04 - 07

Functional currency 08 - 13

The determination of the beginning balance 14 - 15

Comparative presentation 16

A change in the recording and reporting currency 17 - 18

Consolidation 19 - 20

Disclosures 21

Effective Date 22

Attachment

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Reporting Currency SFAS No. 52

The standard paragraphs, printed in bold letters and in italics must be read in the
context of the explanatory paragraphs and the implementation guide in this
statement. There is no requirement to apply this statement on immaterial items.

Objective

01. The objective of this statement is to regulate the currency used by the company in
the accounting records and financial statements.

Scope

02. This statement is applicable to all companies which will or have used currencies
other than Rupiah as the reporting currency.

Definition

03. Followings are definitions of terms used in this statement.

Functional currency is the main currency in the sense of economic substance namely the
main currency reflected in the company’s operating activities.

Reporting currency is the currency used in presenting the financial report.

Recording currency is the currency used by the company to book transactions

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Recording and Reporting currency

04. The reporting currency used by companies in Indonesia is the Rupiah

currency. The company may use any other currency than Rupiah as a
reporting currency, only if that currency meets the criteria of a functional
currency.

05. The recording currency must be the same as the reporting currency.

06. Generally financial statements are reported in local currency. However, if a

company uses a currency other than the local currency (for example American
dollar) as a reporting currency, then that reporting currency must constitute the
functional currency. The functional currency can be the Rupiah currency or a
currency other rupiah (for example American dollar), depending on the fact of the
economic substance.

07. The financial statements are intended to provided financial information regarding
the company’s performance, financial position and cash flow. The financial
statements are the outcome of the accounting records of the company.
Accordingly the currency used in the accounting records is the currency used in
the financial statements. By this concept, the procedures for the re-measurement of
financial statement accounting records or the translation of the financial reports
are no longer required, except for comparative period if the company uses this
standard for the first time (see paragraph 16) and for consolidated company’s
financial report (see paragraph 19), as the financial reports essentially have already
been presented in the functional currency.

Functional currency

08. A currency constitutes a functional currency, if it meets the following

indicators on an overall basis (cumulative) :

a. Cash flow indicator: the cash flow related to the main activity of the
company is dominated by a certain currency.
b. Selling price indicator : the selling price of the company’s product for the
short term is strongly influenced by fluctuations in the exchange rate
of a certain currency or the company’s products are dominantly
marketed for exports.
c. Cost indicator : the company expenses are dominantly influenced by the
fluctuations of a certain currency.

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09. The selling price or company expenses are strongly influenced by the fluctuation in
the exchange rate of a certain currency if the selling price or the expenses are
calculated based on the exchange rate of a certain currency.

10. To determine the functional currency of a company, the indicators mentioned in

paragraphs 08 above must be given due considerations. In addition, a company
having more than one subsidiary or separate and distinct operations, such as a
branch or a division, where the operations can be viewed as an undertaking or a
separate operating activity, may use several different functional currencies, so that
each currency must be considered in determining the functional currency of the
company. In determining the functional currency, the degree of relevance and
reliability could be obtained for example by assigning a weight to each indicator
and based on the weight of each individual indicator the overall weight can be
determined. In this case, the cash inflow has the highest weight. In addition to
assigning a weight, other factors which may have an impact on the long term
economic condition must also be considered.

11. The main factors which may influence the determination of the functional currency
must be identified so that the company has a consistent yardstick. If these factors
cannot be clearly related to one of the currencies as the functional currency, a
professional judgement is required by considering the operations and activities of
the company in details, which must be done with the highest degree of relevance
and reliability.

12. The accounting treatment for transactions in and the balances of non-
functional currencies shall be as regulated in SFAS No. 10 regarding
transactions in foreign currencies.

13. The implication of paragraph 12 above is, that currencies other than the functional
currency are considered as non-functional currencies, while the functional currency
is considered as a base currency in determining the value of exchange or in the
calculation of the exchange rate difference. As an example, if based on the fact of
the economic substance the functional currency of the company is the American
dollar, all other currencies are regarded as non-functional currencies, so that all
transactions in the non-functional currencies must be translated into the functional
currency.

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The determination of the beginning balance

14. The determining of the beginning balance for purposes of the accounting
records shall be made through the re-measurement of the financial report
accounts, as if the functional currency has been used since the date of the
transactions. The procedures for the re-measurement are as follows :

(i). Monetary assets and liabilities shall be re-measured using the exchange
rate on the balance sheet date.
(ii). Non-monetary assets and liabilities and capital stock shall be re-
measured using the historical exchange rate or the exchange rate on the
dates of the acquisition of fixed assets, of the occurrence of the liabilities
or of the payment of capital stock-subscription.
(iii). The difference between assets liabilities and capital stock in the new
reporting currency which represents the result of the calculation under
procedures (i) and (ii) above, shall be booked in the retained earnings or
accumulated losses for the period.
(iv). Income and expenses shall be re-measured using the weighted average
exchange rate during the comparative period, except for depreciation
expenses of fixed assets or amortization of non-monetary assets, which
shall be re-measured using the historical exchange rate of the related
assets.
(v). Dividends shall be measured using the exchange rate on the date of the
declaration of the dividends.
(vi). The procedures under (ii) and (v) above will produce a difference of the
re-measurement which shall be booked in the retained earnings or the
accumulated losses for the period;
(vii). The difference of the re-measurement represents the result of the
following calculations : Retained earnings (accumulated losses) at the
end of the year (the result of procedure (iii) plus dividends (the result of
procedure (v) less the result of the calculation of net profit (loss) during
the period being compared with the result of procedure (iv)).

15. The re-measurement as regulated in paragraph 14, shall be performed

retroactively to the year when the functional currency became effective.

Comparative presentation

16. Financial statements for the comparative period which do not use the
functional currency, must be re-measured and represented, in accordance
with the manner described in paragraphs 14 and 15.

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Change in the recording and reporting currency

17. The company must change the recording and reporting currency to Rupiah,
if the functional currency changes from non-Rupiah to Rupiah. A change in
the recording and reporting currency must be made at the beginning of the
book year, not in the middle of a book year.

18. A decision of the company to change the reporting currency can only be made if
there is a change in the economic substance of the functional currency. During the
life of the company the functional currency may change due to changes in
operations or in the market.

Consolidation

19. The consolidated financial statements shall be presented in the functional

currency after considering the indicators in paragraph 08 to the parent
company and each subsidiary. The translation of the financial statements of
the subsidiaries to the functional currency in the consolidated financial
statements shall be made in the following manner :

(i). Assets and liabilities shall be translated using the exchange rate on the
balance sheet date ;
(ii). Equity shall be translated using the historical exchange rate;
(iii). Income and expenses shall be translated using the weighted average
exchange rate;
(iv). Dividends shall be measured using the exchange rate on the date of
dividend declaration;
(v). The procedures in (i) to (ii) will produce a difference in translation
which shall be presented in the equity account as “Translation
Difference”.

20. The recording currency of the parent company should be the same as the
consolidated reporting currency.

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Disclosures

21. The company shall disclose the followings :

a. The reasons for the determination of the reporting currency based on the
indicators in paragraph 08;
b. Changes in the reporting currency and the reasons for the change :
(i). a reason for a change based on the indicators in paragraph 08;
(ii). the exchange rates (historical, current or weighted average) used
in the re-measurement or translation;
(iii). a summary of the balance sheet and profit and loss statement
presented as a comparison in the previous reporting currency.

EFFECTIVE DATE

22. This statement becomes effective for the preparation and presentation of
financial statements covering the reporting period beginning with or after 1
January, 2000. Early implementation is encouraged.

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Attachment …

Attachment …

THE RE-MEASUREMENT TO THE FUNCTIONAL CURRENCY

A re-measurement is intended to obtain the same results if the accounting records of the
company are maintained in the functional currency. The historical exchange rates, the
current exchange and the weighted average exchange rate are used in the re-measurement
process. The followings are examples of accounts using historical exchange rate, current
exchange rate and the weighted average exchange rate.

A. Accounts re-measured with historical exchange rate

Balance Sheet accounts

Valuable papers which assessed based on acquisition costs

Inventories valued based on acquisition costs
Advance payments, such as insurance, advertisement and rent
Fixed assets
Patent, trademark, license and formulae
Goodwill
Other intangible assets
Deferred expenses and credits, except the acquisition cost of an insurance policy
for insurance companies.
Deferred income
Common stocks
Preferred stocks valued based on the issuance price

Profit and loss accounts

Income and expenses related to non-monetary assets or liabilities

Costs of goods sold
Depreciation of Fixed Assets
Amortization of intangible assets
Amortization of Deferred Income.

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B. Accounts re-measured with the current exchange rate

Assets and Liabilities other than those mentioned above shall be measured using
the current exchange rate. Generally, accounts using the current exchange rate are
the monetary assets and liabilities.

C. Accounts, re-measured with the weighted average exchange rate

The profit and loss accounts should actually be measured using the historical
exchange rate. However, if this is implemented, the preparation of the financial
statements will become impractical. In this case another method can be adopted,
namely by using the weighted average exchange rate, which reflects the exchange
rate fluctuation during the period covered by the financial statements

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