SAK vs IFRS Explained for Foreign Businesses in Indonesia

Foreign companies operating in Indonesia often prioritize market entry and tax planning, while SAK (Standar Akuntansi Keuangan) is addressed later. SAK is central to statutory reporting, audits, and tax compliance, making it a key consideration from the start. Addressing common implementation challenges can help companies plan more effectively for compliance requirements. 

Indonesia does not apply IFRS (International Financial Reporting Standards) directly. Companies must follow SAK, which is based on IFRS but adapted to local regulatory requirements. This article explains how SAK differs from IFRS, how PSAK under DSAK IAI structures Indonesian accounting standards, and how foreign companies can align local compliance with group reporting needs. 

Why Accounting Standards Matter for Foreign Companies 

For foreign companies, accounting standards in Indonesia directly affect how the business is evaluated by regulators, auditors, and tax authorities. Financial statements are not treated as internal records. They serve as the primary reference for tax assessments, statutory audits, and regulatory filings throughout the company’s lifecycle. 

Using the correct framework under SAK and PSAK ensures that revenue, assets, expenses, and foreign currency transactions are recognized in accordance with Indonesian authorities’ requirements. When accounting treatments do not comply with local standards, companies may face delayed audits, tax adjustments, or challenges in distributing profits or reporting to shareholders. 

For foreign investors, accounting standards therefore function as a control mechanism rather than a formality. Applying accounting standards in Indonesia correctly from the beginning helps maintain regulatory certainty, reduces compliance risks, and allows local reporting to support both operational decisions and group-level financial oversight.

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What is SAK and How Does It Align With IFRS 

SAK (Standar Akuntansi Keuangan) is Indonesia’s official accounting framework issued by DSAK IAI. It governs how companies prepare financial statements under Indonesia accounting standards and is mandatory for statutory reporting, audits, and tax compliance. 

What SAK Covers 

SAK sets the rules for how financial information is recorded and presented, including: 

• Recognition of revenue, expenses, assets, and liabilities 
• Measurement and valuation principles, including fair value concepts 
• Financial statement structure and disclosure requirements 
• Standards used by auditors and tax authorities as the compliance benchmark 

How SAK Relates to IFRS 

SAK is primarily developed based on IFRS, which helps foreign companies align local and group reporting: 

• Core accounting principles follow IFRS concepts 
• Individual standards are issued as PSAK, many of which mirror IFRS topics 
• Key areas such as revenue, leases, and financial instruments adopt IFRS-based approaches 

Key Differences Between SAK and IFRS 

Despite the alignment, SAK is not a complete replica of IFRS: 

• Some PSAK standards are adopted later than their IFRS counterparts 
• Local adjustments reflect Indonesian tax rules and regulatory practices 
• Additional disclosures may be required under accounting standards in Indonesia 

Addressing differences between IFRS and SAK early helps foreign companies feel prepared and capable of maintaining compliance while supporting group reporting needs. 

Which Standard Must Foreign Companies Use in Indonesia? 

Financial reporting in Indonesia follows specific rules that directly affect how foreign companies prepare their accounts. All statutory financial statements must comply with PSAK, which form the core of SAK and define the accepted accounting standards in Indonesia. 

Under PSAK, companies are required to apply clear guidelines in several key areas: 

• Revenue recognition, with specific treatments depending on the nature of the business and industry 
• Asset valuation and depreciation, including rules on fixed asset revaluation and amortization methods 
• Inventory accounting commonly uses the FIFO (First In, First Out) or weighted-average cost methods, both of which can affect reported profits and tax exposure. 
• Foreign currency transactions, which must be recorded and translated in accordance with PSAK, particularly for businesses engaged in cross-border trade 

For foreign companies, these requirements mean that financial statements must be prepared in line with SAK and PSAK, even if group reporting is based on IFRS. Applying the correct standard ensures that financial reports are accepted for audit, tax assessment, and regulatory review in Indonesia.

Key Adjustments When Converting IFRS-Based Records to SAK 

Foreign-owned companies need a reporting structure that balances Indonesia accounting standards with global consolidation requirements. In practice, this means choosing a model that keeps SAK compliance intact while supporting IFRS reporting at the group level. 

Standard Reporting Models Used by PT PMA 

Most foreign-owned companies adopt a SAK-first, IFRS-reconciled model, where: 

• Daily transactions are recorded under SAK and PSAK 
• IFRS conversion schedules are prepared quarterly or annually for parent reporting 
• Statutory financial statements remain fully compliant with local regulations 
• Administrative workload is kept efficient without duplicating ledgers 

In more complex situations, companies may use parallel SAK and IFRS ledgers, especially when: 

• The company is under OJK supervision 
• There are cross-border financing or lender reporting requirements 
• Investors require real-time IFRS financial statements 
• A unified chart of accounts is needed to map SAK and IFRS consistently 

Why Early Structuring Matters 

Establishing an integrated reporting structure early allows CFOs and controllers to: 

• Manage statutory, tax, and investor reporting simultaneously 
• Reduce audit and reconciliation risks 
• Adapt smoothly as SAK continues to converge with IFRS

Simplify Indonesian Accounting and Stay Fully Compliant with InCorp 

With the correct setup, compliance need not slow growth. Leveraging professional accounting services in Indonesia helps ensure SAK-compliant bookkeeping and audit-ready reporting, while tax consulting support keeps accounting treatments aligned with local tax regulations. 

InCorp Indonesia (an Ascentium Company) supports foreign companies across accounting, reporting, and tax compliance, allowing management teams to focus on operations with confidence through: 

• Accounting for SAK and PSAK-compliant bookkeeping 
• Financial reporting for IFRS reconciliation and audit readiness 
• Tax consulting aligned with Indonesian tax regulations 

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