Introduction
Pursuant to the Indonesian Financial Accounting Standards (“PSAK No. 201/2022”), financial statements serve as a structured presentation of an entity’s financial position and financial performance. The obligation to prepare and present financial statements is further emphasized under Law No. 40 of 2007 on Company Law, (“Company Law“), which mandates that financial statements be submitted to the General Meeting of Shareholders (“GMS“) as part of corporate accountability.
Legal Obligations for Financial Statements under Indonesian La
Under Article 78 paragraph (3) of the Company Law, the Board of Directors is required to present financial statements to the Annual GMS, which must at least include:
a. The balance sheet for the end of the past financial year in comparison with the previous financial year;
b. The income statement for the relevant financial year;
c. The cash flow statement;
d. The statement of changes in equity; and
e. Notes to the financial statements.
Furthermore, Article 68 paragraph (1) of the Company Law mandates that companies meeting certain criteria must submit their financial statements for an audit by a public accountant, which is:
a. Company’s business activities involve collecting and/or managing public funds;
b. Company issues debt acknowledgment securities to the public;
c. Company is a Public Company;
d. Company is a State-Owned Enterprise;
e. Company has assets and/or business turnover with a minimum value of Rp 50,000,000,000.00 (fifty billion Rupiah); or
f. It is required by statutory regulations.
The audited financial statements must also be confirmed to the Financial Professional Development Center (Pusat Pembinaan Profesi Keuangan – “PPPK“) through the scanning of a QR Code, as stipulated in the Ministry of Finance Circular Letter No. SE-4/PPPK/2024.
The Issue of Dual Financial Statements
Despite the clear regulatory framework, in practice, certain companies may prepare and maintain two versions of financial statements: an audited version and an unaudited version.
This occurs when a company that is legally obligated to have its financial statements audited nonetheless opts to produce an unaudited version, often for internal or alternative reporting purposes.
Such practice raises concerns regarding compliance with Indonesian law. In accordance with Article 68 paragraph (1) of the Company Law and the Ministry of Finance Circular Letter No. SE-4/PPPK/2024, the financial statements that are audited by a public accountant and confirmed to the PPPK constitute the legally recognized financial statements under Indonesian law. Any unaudited financial statement, even if prepared by the company itself, does not fulfill the legal obligations for the Company who meeting the certain criteria as stated on Article 68 paragraph (1) of Company Law.
Conclusion
In light of the above, companies that fall within the scope of Article 68 paragraph (1) of the Company Law must ensure that their financial statements are properly audited and confirmed to the PPPK. The audited financial statements serve as the only legally acknowledged version, as reaffirmed by the Ministry of Finance Circular Letter No. SE-4/PPPK/2024.
If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.
Author:
Budhi Satya Makmur