Bank Indonesia Financial Accounting Policies

Transcription

1. Bank Indonesia Financial Accounting Policies (KAKBI) Komite Penyusun KAKBI
2. Bank Indonesia Financial Accounting Policies (KAKBI) Komite Penyusun KAKBI
3. Table of Contents Table of Contents Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements PKAK 01 : Accounting Policies PKAK 02 : Presentation of Financial Statements PKAK 03 : The Effects of Changes in Foreign Exchange Rates PKAK 04 : Gold PKAK 05 : Currency in Circulation PKAK 06 : Policy-related Financial Instruments PKAK 07 : Non Unique Transactions Duties and Authority of the Bank Indonesia Financial Accounting Policies Committee in Preparing the Bank Indonesia Financial Accounting Policies
4. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS (PDP2LK / “FUNDAMENTAL PRINCIPLES”)
5. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Committee (“KAKBI Committee”) approved and adopted the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (“PDP2LK”) at its meeting on 29 October 2012. Jakarta, 29 October 2012 KAKBI Committee Steering Board Rosita Uli Sinaga Chair Harti Haryani Deputy Chair Ardhayadi M. Member Hilzahra Pheni Member Marsuki Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member
6. TABLE OF CONTENTS Paragraph s INTRODUCTION ........................................................................................ 01-27 Purpose and Roles .........................................................................................02-04 Scope .............................................................................................................05-11 Bank Indonesia Financial Accounting Environment .......................................12-27 The Objective of Bank Indonesia .................................................................14-17 Relationship between Bank Indonesia‟s Objective and Transactions ...........18-22 Other Functions and Duties of Bank Indonesia ............................................... 23 Bank Indonesia as an Independent State Institution ....................................... 24 Bank Indonesia Financial Statement Users and Information Needs ............25-27 THE OBJECTIVE OF BANK INDONESIA FINANCIAL STATEMENTS ............ 28-35 Bank Indonesia Financial Position and Surplus/Deficit .................................30-34 Notes and Supplementary Schedules .................................................................. 35 BASIC ACCOUNTING ASSUMPTION ........................................................... 36-38 Accrual Basis ...................................................................................................... 36 Going Concern ................................................................................................... 37 Time Period ......................................................................................................... 38 QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS .............. 39-63 Understandability ............................................................................................... 40 Relevance .......................................................................................................41-46 Relevance to the Achievement of Bank Indonesia‟s Objective ........................... 43 Materiality ..................................................................................................44-45 Timeliness ....................................................................................................... 46 Reliability .......................................................................................................47-54 Prudence ......................................................................................................... 49 Faithful Presentation ..................................................................................50-51 Substance Over Form ...................................................................................... 52 Neutrality ........................................................................................................ 53 Completeness .................................................................................................. 54 Comparability ................................................................................................55-58 Constraints on Relevance and Reliability .......................................................59-62 Balance between Cost and Benefit .................................................................. 59
7. Balance between Qualitative Characteristics ..............................................60-61 Constraints on Predictive Value ....................................................................... 62 Fair Presentation ............................................................................................... 63 THE ELEMENTS OF FINANCIAL STATEMENTS ........................................ 64-101 Financial Position ..........................................................................................66-87 Assets .........................................................................................................70-76 Liabilities ....................................................................................................77-87 Surplus/Deficit ............................................................................................ 88-101 Income .......................................................................................................93-97 Expenses ..................................................................................................98-101 RECOGNITION OF THE ELEMENTS OF FINANCIAL STATEMENTS ........ 102-123 Probability of Future Economic Benefits and the Compatibility of Economic Benefits with the Achievement of Bank Indonesia‟s Objective .................... 105-107 Reliability of Measurement ........................................................................ 108-110 Recognition of Assets ................................................................................. 111-112 Recognition of Currency in Circulation ............................................................. 113 Recognition of Other Liabilities from Bank Indonesia Policy Implementation..... 114 Recognition of Revaluation Reserves ................................................................. 115 Recognition of Capital ....................................................................................... 116 Recognition of Income ................................................................................ 117-118 Recognition of Expenses ............................................................................ 119-123 MEASUREMENT OF THE ELEMENTS OF FINANCIAL STATEMENTS ....... 124-127
8. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 INTRODUCTION 01 . The conceptual framework of financial reporting in Bank Indonesia is governed by the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (“PDP2LK”), in accordance with Bank Indonesia Board of Governors Regulation (PDGBI) No. 14/10/PDG/2012, dated 04 May 2012 (on the Basic Framework for the Preparation of Bank Indonesia Financial Accounting Policies (KDPKAK-BI). Purpose and Roles (a) (b) (c) (d) 02. These fundamental principles are used as references by: the Bank Indonesia Financial Accounting Policies Committee in the performance of its duties; the management of Bank Indonesia in dealing with financial accounting issues that have yet to form the subject of a Bank Indonesia‟s Statement of Financial Accounting Policy; the auditor of Bank Indonesia financial statements in forming an opinion as to whether financial statements of Bank Indonesia conform with Bank Indonesia‟s Statements of Financial Accounting Policy; and the users of Bank Indonesia financial statements in interpreting the information contained in financial statements prepared in conformity with Bank Indonesia‟s Statements of Financial Accounting Policy. 03. These principles are not a Statement of Financial Accounting Policy and hence do not define statement of accounting policy for any particular measurement or disclosure issue. 04. In the event that there is a fundamental difference between the fundamental principles and the Statements of Financial Accounting Policy, the requirements of the Statements of Financial Accounting Policy prevail over those of the fundamental principles. As, however, the Bank Indonesia Financial Accounting Policies Committee will be guided by the fundamental principles in the development of future Bank Indonesia Statements of Financial Accounting Policy and in its review of existing Statements of Financial Accounting Policy, the number of fundamental differences will be reduced through time. Scope 05. The Fundamental Principles are the principles underlying the accounting treatment of both conventional and unique transactions involving Bank Indonesia. The principles underlying the accounting treatment of conventional transactions that are not unique refer to the Conceptual Framework for the Preparation and Presentation of General Financial 1 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
9. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Accounting Standard Financial Statements (KDP2LK SAK). The principles underlying the accounting treatment of sharia transactions that are not unique refer to the Conceptual Framework for the Preparation and Presentation of Sharia Financial Accounting Standard Financial Statements (KDP2LK SAK Sharia), while the principles underlying the accounting treatment of transactions that are both sharia and unique refers to the special rules prepared by Bank Indonesia Financial Accounting Policies Committee. 06. Bank Indonesia sharia transactions are transactions conducted by Bank Indonesia based on sharia principles. Transactions which are not in conformity with the definition are categorized as conventional transactions. (a) (b) (a) (b) (c) (d) 07. Bank Indonesia unique transactions consist of: transactions that are only conducted by Bank Indonesia in its capacity as the central bank; and transactions that are also conducted by other entities, but are conducted by Bank Indonesia with different objectives. 08. These fundamental principles cover: the objective of Bank Indonesia financial statements; the basic assumptions of Bank Indonesia financial statements; the qualitative characteristics that determine the usefulness of information in the Bank Indonesia financial statements; and the definition, recognition, and measurement of the elements of Bank Indonesia financial statements. 09. The fundamental principles are concerned with general purpose financial statements (hereafter referred to as "financial statements". The financial statements are prepared and presented in accordance with the accounting periods stipulated in the Bank Indonesia regulations. Some users require, and are entitled to obtain, additional information besides what is presented in the financial statements. Many users, however, rely on the financial statements as their major source of financial information. Such financial statements should, therefore, be prepared and presented with their needs in view. Special purpose financial reports and computations prepared for taxation purposes are outside the scope of so these fundamental principles. 10. Financial statements form part of the process of financial reporting. Bank Indonesia's complete financial statements consist of the statement of financial position, statement of surplus/deficit, notes and other reports, explanatory material that are an integral part of the financial statements, as well as schedules and additional information relating to the financial statements. 2 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
10. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 11 . The fundamental principles apply to Bank Indonesia financial statements. Bank Indonesia presents its financial statements to the users who rely on the financial statements as their primary source of financial information about Bank Indonesia. Bank Indonesia Financial Accounting Environment 12. The organisational environment of Bank Indonesia affects the characteristics of Bank Indonesia accounting and financial reporting objectives. 13. Important characteristics of Bank Indonesia environment that need to be considered in determining accounting and financial reporting objectives are as follows: (a) the objective of Bank Indonesia; (b) the relationship between Bank Indonesia‟s objective and its transactions; (c) other functions and duties of Bank Indonesia; and (d) the status of Bank Indonesia as an independent state institution. The Objective of Bank Indonesia 14. The objective of Bank Indonesia is to achieve and maintain stability of the Rupiah value in accordance with the mandate provided by law. The stability of the Rupiah value is primarily influenced by monetary, fiscal, financial sector, and real sector policies. As the authority of Bank Indonesia does not encompass all these policy sectors, the achievement of the objective of Bank Indonesia is not entirely under control of Bank Indonesia. 15. The achievement of the objective of Bank Indonesia, namely, the stability of Rupiah value, is incapable of being assessed in solely monetary terms. Consequently, Bank Indonesia financial statements cannot be directly used to assess the level of achievement of Bank Indonesia‟s objective. Nevertheless, the financial effects of the majority of the endeavours and activities undertaken by Bank Indonesia so as to achieve its objective may be measured in monetary terms therefore Bank Indonesia financial statements can be used to assess the financial effects of Bank Indonesia‟s efforts to achieve its objective. To increase the understanding of users as regards the financial information presented by Bank Indonesia, users also need to consider non-financial information that helps with the interpreting the financial information. 16. The Bank Indonesia financial statements are not intended to provide information about efficiency in the use of resources in achieving the objective of Bank Indonesia. As explained in paragraph 15, the use of resources by Bank Indonesia may be measured in monetary terms, but the 3 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
11. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 achievement of its objective cannot be measured in monetary terms . Consequently, efficiency cannot be assessed by comparing the financial value of the objective with the cost incurred in achieving that objective. 17. The benefits to be obtained through the achievement of Bank Indonesia objective are not only perceived economically, but also socially. Bank Indonesia's success in achieving and maintaining Rupiah value stability helps provide certainty to business, improves public confidence, both domestic and foreign, in the national economy, prevents declines in purchasing power resulting from uncontrolled inflation, and ultimately helps create better social conditions and social environment. Relationship between Bank Indonesia Objective and Transactions 18. In order to achieve the objective that was defined in paragraph 14, Bank Indonesia performs duties that give rise to different types of transactions, or similar types of transactions with different goals, when compared with other entities. These have an impact on the significance of the financial information related to such transactions. Therefore, financial information on the transactions conducted by Bank Indonesia must be interpreted having regard to the achievement of Bank Indonesia‟s objective. 19. One of transactions that is conducted by Bank Indonesia and which is not found in other entities, whether commercial or government, is related to currency in circulation. Currency in circulation represents a liability of Bank Indonesia, but it does not indicate a claim against specific assets of Bank Indonesia and has no maturity date. 20. Bank Indonesia has the authority to influence the money supply in order to achieve stability in the value of the rupiah. This authority gives rise to a liability of Bank Indonesia, denominated in rupiah, that is not a source of funding but rather a Bank Indonesia policy instrument. This stands in contrast to commercial and other government entities. 21. The assets held by Bank Indonesia are also intended to primarily serve as policy instruments, unlike assets held by commercial entities, which are employed as productive resources to generate profit, or assets held government entities, where they are employed as supporting resources for government policies and operations. For example, a placement of funds by a commercial entity is intended to obtain a certain return or control over another entity, while such placement by a government entity is intended to obtain a certain return that will then be used as a source of funding for government activities. By contrast, fund placements by Bank Indonesia are mainly employed as a policy instrument to influence the value of the rupiah. 4 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
12. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 22 . Bank Indonesia, in its capacity as the central bank of the Republic of Indonesia and in accordance with its objective and common practice in other central banks, measures all transactions and presents its financial statements in the country's national currency, the rupiah. However, as part of Bank Indonesia‟s endeavours in achieving and maintaining the stability of the value of rupiah, Bank Indonesia also applies policies to maintain a certain composition of foreign exchange reserves in amounts that are material to the total assets of Bank Indonesia. The holding of foreign exchange reserves has an impact in the form of the conversion of their value into rupiah or the conversion of value of inter-currency transactions into rupiah. This means that the financial statements of Bank Indonesia may not fully reflect the economic substance of Bank Indonesia‟s foreign currency transactions and foreign exchange reserves. Other Functions and Duties of Bank Indonesia 23. Bank Indonesia has a number of other functions and duties mandated by the legislation. These other functions and duties require Bank Indonesia to conduct certain activities and transactions that have financial effects on Bank Indonesia. Financial information related to these functions and duties is presented as part of the financial statements of Bank Indonesia. Bank Indonesia as an Independent State Institution 24. Bank Indonesia is the central bank of the Republic of Indonesia. Bank Indonesia is a state institution that is independent and free from interference by government and / or other parties, except in respect of such matters as are expressly prescribed by the legislation. Bank Indonesia Financial Statement Users and Information Needs 25. The user of Bank Indonesia financial statements is society as a whole. More specifically, the members of society that constitute users of the financial statements of Bank Indonesia may be classified further into public representatives (House of Representatives), audit institutions (Audit Board of the Republic of Indonesia), government, economic actors, including domestic and international financial market actors (including banks), lenders, other central banks, international organisations, analysts and academics, and other members of society. They use Bank Indonesia financial statements to meet their needs for different types of information. However, in general, the users‟ information need of Bank Indonesia financial statements is to assess the accountability of Bank Indonesia management in achieving the objective, as mandated by legislation. 5 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
13. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 . The public interest is the reference in determining the financial reporting rule applied by Bank Indonesia. However, the information presented in Bank Indonesia financial statements is general in nature and is not capable of satisfying the information needs of every user. 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 29. Bank Indonesia financial statements prepared for this purpose meet the common information needs of most users. However, Bank Indonesia financial statements do not provide all of the information that users may need to make economic decisions since they largely portray the financial effects of past events and do not necessarily provide non-financial information. 27. The management of an entity has the primary responsibility for the preparation and presentation of the financial statements of the entity. Management is also interested in the information contained in the financial statements even though it has access to additional management and financial information that helps it carry out its planning, control, and decision-making responsibilities. Management has the ability to determine the form and content of such additional information in order to meet its own needs. The reporting of such additional information, however, is beyond the scope of this Framework. Nevertheless, published financial statements are based on the information used by management about the financial position and the surplus/deficit of Bank Indonesia. THE OBJECTIVE OF BANK INDONESIA FINANCIAL STATEMENTS 28. The objective of Bank Indonesia financial statements of is to demonstrate the achievements of management or the fulfilment of management‟s responsibilities in achieving and maintaining the stability of Rupiah value, which includes information on the financial effects of Bank Indonesia‟s policies on the financial position and the surplus/deficit of Bank Indonesia. Bank Indonesia Financial Position and Surplus/Deficit 30. In order to assess the accountability of Bank Indonesia management, users of Bank Indonesia financial statements need information on the Bank Indonesia‟s efforts to achieve its objective. The users can gain a better understanding of such efforts through the general overview of the financial effects of Bank Indonesia's policies on the Bank‟s financial position and surplus/deficit. 31. The financial position of Bank Indonesia is affected by the policies pursued by Bank Indonesia as reflected in users may need to make economic decisions since they largely portray the financial effects of past events and do not necessarily provide non-financial information. Information on the 6 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
14. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 resources controlled by Bank Indonesia and its capabilities in managing these resources in the past , as well as information on the structure of Bank Indonesia‟s liabilities, is useful for predicting the capacity of Bank Indonesia to achieve and maintain Rupiah value stability. 32. Bank Indonesia‟s surplus/deficit is affected by Bank Indonesia‟s income and expenses over a given period. Bank Indonesia‟s income represents the financial effect that arises in a particular period, especially from the management of assets in the context of achieving Bank Indonesia‟s objective. Bank Indonesia‟s income is not a primary goal of Bank Indonesia. Bank Indonesia‟s expenses mainly represent the cost of policy implementation in a particular period in order to achieve the objective of Bank Indonesia, and are generally not associated with the acquisition of income. Therefore, the information on Bank Indonesia‟s surplus/deficit is not intended to reflect the financial performance of Bank Indonesia. 33. Information on the financial impact of Bank Indonesia‟s policies on the financial position is mainly provided in the statement of financial position. Information on the financial effect of Bank Indonesia's policies on the surplus/deficit of Bank Indonesia is mainly provided in the statement of surplus/deficit. 34. The components of Bank Indonesia's financial statements are interrelated as they reflect different aspects of the same transactions or other events. Although each statement provides different types of information, none are intended to fulfil a single purpose or provide all the information required to meet the specific needs of users. For example, the statement of surplus/deficit provides an incomplete picture of the endeavours of Bank Indonesia to achieve its objective, except when read in conjunction with the statement of financial position. Notes and Supplementary Schedules 35. The financial statements also contain notes and supplementary schedules and other information. These contain additional information, both financial and non-financial, that is relevant for understanding the information contained in the statement of financial position and statement of surplus/deficit of Bank Indonesia. BASIC ACCOUNTING ASSUMPTIONS Accrual Basis 36. In order to meet their objectives, financial statements are prepared on the accrual basis of accounting. Under this basis, the effects of transactions and other events are recognised when they occur (and not as 7 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
15. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 cash or its equivalent is received or paid ) and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate. Financial statements prepared on the accrual basis inform users not only of past transactions involving the payment and receipt of cash but also of obligations to pay cash in the future and of resources that represent cash to be received in the future. Hence, they provide the type of information about past transactions and other events that is most useful to users in making economic decisions. Going Concern 37. The financial statements of Bank Indonesia are prepared on the assumption that Bank Indonesia will continue to exist. The provisions of the laws and regulations in effect position Bank Indonesia as the only entity that is vested with central bank functions and authority in Indonesia. Accordingly, with regard to the said functions and authority, Bank Indonesia will not be faced with a situation where its continuity of existence is threatened. Time Period 38. Bank Indonesia‟s accounting and financial reporting activities are divided into reporting periods so that surplus/deficit can be measured and Bank Indonesia‟s financial position can be determined. The calendar year is the main accounting period used. QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS 39. Qualitative characteristics are the attributes that make the information provided in financial statements useful to users. The four principal qualitative characteristics are understandability, relevance, reliability, and comparability. Understandability 40. The information presented in the financial statements should be capable of being understood by the user and must be expressed in forms and terms that are adjusted to the users‟ limit of understanding the objective of Bank Indonesia and the impact on financial reporting by Bank Indonesia, and have the capacity to study the information in question. However, complex information that should be included in the financial statements should not be excluded merely on the grounds that it may be too difficult for certain users to understand. 8 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
16. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Relevance 41 . To be useful, information must be relevant to the decision-making needs of users. Information has the quality of relevance when it influences the economic decisions of users by helping them evaluate past, present or future events or confirming, or correcting, their past evaluations. 42. The predictive and confirmatory roles of information are interrelated. For example, information on the structure and amount of assets held by Bank Indonesia is helpful to users when predicting the ability of Bank Indonesia to achieve its objective in the future, or Bank Indonesia's ability to with stand pressures arising from changes in the national, regional and global economies. The same information also plays a confirmatory role in respect of the policies pursued by Bank Indonesia. Relevance to the Achievement of Bank Indonesia‟s Objective 43. Relevant information in financial reporting by Bank Indonesia refers to information that reflects Bank Indonesia‟s efforts to achieve its objective. Bank Indonesia's objective results in differences between the economic significance of particular transactions conducted by Bank Indonesia and the economic significance of similar transactions in other entities. Therefore, the significance of the financial information presented in the financial statements of Bank Indonesia differs from the significance of financial information presented in the financial statements of other entities. Materiality 44. The relevance of information is affected by its nature and materiality. In some cases, the nature of information alone is sufficient to determine its relevance. However, in other cases, both nature and materiality are considered important. 45. Information is deemed to be material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Thus, materiality provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful. Timeliness 46. Relevant information is information that is presented in a timely manner so as to be influential and useful in decision making. 9 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
17. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 Reliability 47 . To be useful, information must also be reliable. Information has the quality of reliability when it is free from bias and material error and can be depended upon by users to represent faithfully that which it either purports to represent or could reasonably be expected to represent. 48. A particular item of information may be relevant, but if its nature or presentation is not reliable, the use of such information could be potentially misleading. For example, if the validity and amount of claims on Bank Indonesia placements in the government securities of a foreign country that is experiencing financial difficulties is disputed, it may not be appropriate for Bank Indonesia to recognise the entire amount of the claims in the statement of financial position, although it may be appropriate to disclose the number and circumstances of such claims. Prudence 49. The preparers of financial statements do, however, have to contend with the uncertainties that inevitably surround many events and circumstances. Such uncertainties are recognised by the disclosure of their nature and extent and by the exercise of prudence in the preparation of the financial statements. Prudence is the inclusion of a degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated. However, the exercise of prudence does not allow, for example, the creation of hidden reserves or excessive provisions, the deliberate understatement of assets or income, or the deliberate overstatement of liabilities or expenses, because the financial statements would not be neutral and, therefore, not have the quality of reliability. Faithful Presentation 50. To be reliable, information must represent faithfully the transactions and other events it either purports to represent or could reasonably be expected to represent. For example, the statement of financial position must represent faithfully the transactions and other events that result in assets and liabilities of Bank Indonesia at the reporting date which meet the recognition criteria. 51. Most financial information is subject to some risk of being less than a faithful representation of that which it purports to portray. This is not due to bias, but rather to inherent difficulties either in identifying the transactions and other events to be measured or in devising and applying measurement and presentation techniques that can convey messages that 10 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
18. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 correspond with those transactions and events . In certain cases, the measurement of the financial effects of items could be so uncertain that entities generally would not recognise them in the financial statements; for example, although the achievement of the objective of Bank Indonesia can help generate goodwill in the form of heightened credibility for Bank Indonesia, it is typically difficult to identify or measure goodwill reliably. However, in other cases, it may be relevant to recognise items and to disclose the risk of error surrounding their recognition and measurement. Substance Over Form 52. Information is intended to represent faithfully the transactions and other events that it purports to represent. Thus, it is necessary that they are accounted for and presented in accordance with their substance and economic reality and not merely their legal form. If the substance of a transaction or other event is inconsistent or different from its legal form, this must be clearly disclosed in the Notes to Financial Statements. Neutrality 53. Information must be aimed at the general needs of the users and must not depend on the needs and desires of a particular party. There should be no attempt to present information that is beneficial to some parties, but prejudicial to others who have opposing interests. Completeness 54. To be reliable, the information in financial statements must be complete within the bounds of materiality and cost. An omission can cause information to be false or misleading and thus unreliable and deficient in terms of its relevance. Comparability 55. Users must be able to compare the financial statements of Bank Indonesia through time in order to identify trends in Bank Indonesia financial position and surplus/deficit. Hence, the measurement and display of the financial effect of like transactions and other events must be carried out in a consistent way over time. 56. An important implication of the qualitative characteristic of comparability is that users be informed of the accounting policies employed in the preparation of the financial statements, any changes in those policies and the effects of such changes. Users need to be able to identify differences between the accounting policies for like transactions and other events in Bank Indonesia from period to period. Compliance with financial accounting 11 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
19. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 policies , including the disclosure of the accounting policies used by Bank Indonesia, helps to achieve comparability of Bank Indonesia‟s Bank Indonesia‟s accounting and financial reports. 57. The need for comparability should not be confused with mere uniformity and should not be allowed to become an impediment to the introduction of improved financial accounting policies. Bank Indonesia does not need to maintain particular accounting policies adopted by management if they are no longer in accordance with the qualitative characteristics of relevance and reliability. Neither does Bank Indonesia not need to maintain particular accounting policies adopted by management if a more relevant and reliable alternative is available. 58. Bank Indonesia needs to present information from the previous period in its financial statements so that users may compare the financial impacts of the implementation of Bank Indonesia's policies on Bank Indonesia‟s financial position and surplus/deficit between periods. Constraints on Relevance and Reliability Balance Between Cost and Benefit 59. The balance between cost and benefit is a pervasive constraint rather than a qualitative characteristic. The benefits derived from information should exceed the cost of providing it (e.g., the presentation of particular information could be used negatively by certain parties or interests and thus hamper the effort to achieve the objective of Bank Indonesia or be used in such a way as to damage the public interest). The evaluation of benefits and costs is, however, substantially a judgemental process. Furthermore, the costs do not necessarily fall on those users who enjoy the benefits. Benefits may also be enjoyed by users other than those for whom the information is prepared; for example, the provision of further information to lenders may reduce the borrowing costs of an entity. For these reasons, it is difficult to apply a cost-benefit test in any particular case should be aware of this constraint. Balance between Qualitative Characteristics 60. In practice a balancing, or trade-off, between qualitative characteristics is often necessary. Generally the aim is to achieve an appropriate balance among the characteristics in order to meet the objective of financial statements. The relative importance of the characteristics in different cases is a matter of professional judgment. 61. One of the trade-offs that may arise relates to reliability and timeliness in the presentation of information. If there is undue delay in the 12 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
20. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 reporting of information it may lose its relevance . Management may need to balance the relative merits of timely reporting and the provision of reliable information. To provide information on a timely basis it may often be necessary to report before all aspects of a transaction or other event are known, thus impairing reliability. Conversely, if reporting is delayed until all aspects are known, the resulting information may be highly reliable but of little use to decision makers. In an effort to achieve a balance between relevance and reliability, the overriding consideration is the needs of decision maker. Constraints on Predictive Value 62. Changes in the national, regional, and global economies affect the policies of Bank Indonesia, the economic capacity of Bank Indonesia‟s financial resources, and the financial impact of the policies implemented by Bank Indonesia. Therefore, the predictive value of the information presented in the financial statements of Bank Indonesia is sensitive to such changes in the economic situation. Users should be aware of the limitations of predictive value when using the financial statements of Bank Indonesia in making decisions. True and Fair Presentation 63. The financial statements of Bank Indonesia show a fair view of, or presents fairly, of the financial impact of Bank Indonesia policies on its financial position and surplus/deficit. Although these basic principles do not deal directly with such concepts, the application of the principal qualitative characteristics and of appropriate financial accounting policies normally results in financial statements that convey what is generally understood as fair view of, or as presenting fairly such information. THE ELEMENTS OF FINANCIAL STATEMENTS 64. Financial statements portray the financial effects of transactions and other events by grouping them into broad classes according to their economic characteristics. These broad classes are termed the elements of financial statements. The elements directly related to the measurement of financial position of Bank Indonesia are assets and liabilities, while the elements that are related to the surplus/deficit of Bank Indonesia are income and expenses. 65. The presentation of these elements in the statement of financial position and statement of surplus/deficit of Bank Indonesia requires a subclassification process, so as to enhance the ability of financial statements users to understand the financial information of Bank Indonesia. 13 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
21. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Financial Position 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 68 . In assessing whether an item meets the definitions of elements of the financial statements, attention needs to be had to the underlying substance and economic reality, and not merely its legal form. 66. The elements of financial position are assets and liabilities. These elements are defined as follows: (a) An asset is a resource controlled by Bank Indonesia as a result of past events and reflect the rights of Bank Indonesia to obtain economic benefits in order to achieve and maintain Rupiah value stability which has economic and social effects on society and the national economy. (b) Liabilities are present claims against Bank Indonesia with different characteristics arising out of past events. 67. The definitions of an asset and a liability identify their essential features but do not attempt to specify the criteria that need to be met before they are recognised in the statement of financial position. Thus, the definitions embrace items that are not recognised as assets or liabilities in the statement of financial position because they do not satisfy the criteria for recognition discussed in paragraphs 102 to 123. In particular, the expectation that future economic benefits will flow to or from an entity must be sufficiently certain to meet the probability criterion in paragraph 103 before an asset or liability is recognised. 69. Statement of financial position drawn up in accordance with current statements of financial accounting policy may include items that do not satisfy the definitions of an asset or liability. The definitions set out in paragraph 66 will, however, underlie future reviews of existing statements of financial accounting policy and the formulation of further policy statements. Assets 70. The future economic benefits embodied in the assets of Bank Indonesia represent the potential of these assets, either directly or indirectly, to be used in the implementation of Bank Indonesia policy to achieve and maintain Rupiah value stability. The potential may be a productive one that is part of the activities of Bank Indonesia. Benefit can also take the form of anything that can be used as a policy instrument or a capability which can increase the effectiveness of objective achievement. 71. Bank Indonesia uses assets, especially as instruments of Bank Indonesia policy implementation, to achieve and maintain Rupiah value stability. 14 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
22. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 72 . The future economic benefits embodied in Bank Indonesia assets may flow to Bank Indonesia in a number of ways. For example, an asset may be: (a) used in the performance of Bank Indonesia‟s duties; (b) exchanged for other assets in the performance of Bank Indonesia‟s duties; and (c) used to settle a liability. 73. Many assets have a physical form. However, physical form is not essential to the existence of an asset. Accordingly, asset that has no physical form is asset of Bank Indonesia if it will provide economic benefits in the future and is controlled by Bank Indonesia. 74. Many assets are associated with legal rights, including the right of ownership. In determining the existence of an asset, the right of ownership is not always essential. Although the capacity of Bank Indonesia to control benefits is usually the result of legal rights, an item may nonetheless satisfy the definition of an asset even when there is no legal control. 75. Bank Indonesia‟s assets originate from transactions and other events in the past. Bank Indonesia typically acquires assets through purchase, grant, conversion of assets into other assets, in-house development, or pursuant to the provisions of the legislation in effect. Transactions or events expected to occur in the future do not in themselves give rise to assets; hence, for example, Bank Indonesia‟s intention to purchase a particular asset does not, of itself, meet the definition of an asset. 76. There is a close association between incurring expenditure and generating assets but the two do not necessarily coincide. Hence, when an entity incurs expenditure, this may provide evidence that future economic benefits were sought but is not conclusive proof that a good or service satisfying the definition of an asset has been obtained. Similarly the absence of a related expenditure does not preclude a good or service from satisfying the definition of an asset and thus becoming a candidate for recognition in the statement of financial position. For example, grants received by Bank Indonesia come within the scope of the definition of an asset. Liabilities 77. The liabilities of Bank Indonesia primarily consist of currency in circulation, other liabilities from Bank Indonesia policy implementation, revaluation reserves, capital, and accumulated surplus/deficit. 78. Currency in circulation refers to rupiah currency legal tender that is not under the control of Bank Indonesia. Bank Indonesia is the only 15 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
23. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 institution with authority to issue and circulate rupiah currency and to withdraw rupiah currency from circulation . 43 44 45 84. Some types of liability arising from Bank Indonesia policy implementation can be measured only by using a substantial level of estimation. Such liabilities are referred to as provisions. If provisions relate to 79. Other liabilities from Bank Indonesia policy implementation reflects a potential increase in the other liabilities and / or potential decrease in the resources of Bank Indonesia in the future arising out of the implementation of Bank Indonesia policy in the past. For example, debtbased monetary instruments (Rupiah or foreign currency-based), and bank and government demand deposits at Bank Indonesia. 80. An essential characteristic of other liabilities from Bank Indonesia policy implementation is that it refers to present obligations of Bank Indonesia. Such obligations are based on a duty or responsibility to act or do something in a certain way. Obligations can be enforced by law as a consequence of a binding contract or legislation. However, obligations can also arise from the substance of a transaction that comes within the definition of others liabilities from Bank Indonesia policy implementation. 81. Present obligations are different from future commitments. Management decisions by Bank Indonesia to purchase financial instruments in the future do not merely give rise to present obligations. Obligations normally arise only if the related asset has been delivered or Bank Indonesia has entered into an irrevocable agreement to purchase the assets. The essence of an irrevocable agreement is that the economic consequences of a failure to fulfil the obligations under the agreement mean that Bank Indonesia has few options to prevent the flow of resources to a third party, for example, in a case where the agreement imposed substantial penalties for breach. 82. Bank Indonesia‟s present obligations that are denominated in rupiah are generally settled through their replacement with other obligations. The settlement of a present obligation of Bank Indonesia that is denominated in foreign currency is generally effected through the delivery of foreign exchange. Settlement may also be conducted by the payment of rupiah. Obligations can also be eliminated by other means, such as where lending institutions relinquish or cancel their rights. 83. Other liabilities from Bank Indonesia policy implementation arise as a result of past transactions or events. For example, the issuance of a policy instrument in the form of debt instrument gives rise to financial liabilities, while the acceptance of loans gives rise to liabilities to repay such loans. 16 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
24. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 present obligations and satisfy the other criteria in the definition of other liabilities from Bank Indonesia policy implementation , the related items are also categorized as other liabilities from Bank Indonesia policy implementation, although their amounts must be estimated. 41 42 43 91. The definitions of income and expenses identify their essential features but do not attempt to specify the criteria that would need to be met before they are recognised in the Bank Indonesia statement of 85. Revaluation reserves reflect the cumulative changes in the fair value of the assets and liabilities of Bank Indonesia or the financial effects of Bank Indonesia unique transactions where such transactions have yet to achieve their ultimate objectives. 86. Capital is the capital of Bank Indonesia as stipulated by the legislation. 87. Accumulated surplus/deficit is the surplus/deficit originating from the current period and prior periods. Surplus/Deficit 88. The elements of statement of surplus/deficit are income and expenses. The recognition and measurement of Bank Indonesia‟s income and expenses are affected by the implementation of Bank Indonesia management accountability in the context of the performance of its duties to achieve Bank Indonesia‟s objective. Accordingly, the recognition and measurement of Bank Indonesia‟s income and expenses take into account the concept of conformity having regard to the objective of Bank Indonesia, as explained in paragraph 43. (a) (b) 89. The income and expenses elements are defined as follows: Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in the accumulated surplus/deficit, other than those related to capital addition. Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrence of liabilities that result in decreases in the accumulated surplus/deficit. 90. Income and expenses that meet the definitions given in paragraph 89 are income and expenses that arise from transactions that have been realised and Bank Indonesia unique transactions that have achieved their ultimate objectives. 17 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
25. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 surplus /deficit. The criteria for the recognition of income and expenses are discussed in paragraphs 102 to 123. 92. Income and expenses may be presented in different ways in the Bank Indonesia statement of surplus/deficit so as to provide information that is relevant to decision making. Income and expenses in the Bank Indonesia statement of surplus/deficit are grouped based on the particular characteristics of Bank Indonesia as the central bank. Income 93. The definition of income encompasses revenue and gains. Revenue arises from Bank Indonesia‟s ordinary activities, such as interest revenue and banking services revenue. 94. Gains represent other items that meet the definition of income and may or may not arise in the course of Bank Indonesia‟s ordinary activities. Gains represent increases in economic benefits. Thus, in essence gains are no different in nature from revenue. Therefore, the item is not regarded as constituting a separate element in these fundamental principles. 95. The definition of income in Bank Indonesia statement of surplus/deficit does not include unrealised gains, such as those arising from changes in the fair value of Bank Indonesia‟s assets and liabilities, or the financial impact of Bank Indonesia unique transactions that have yet to achieve their ultimate objectives. 96. Gains recognised in the Bank Indonesia statement of surplus/deficit are presented separately as information on these items is useful for decision-making, except where immaterial. Gains are reported in gross amounts, before deducted to relevant expenses, except where not material. 97. Various kinds of assets may be received or enhanced by income. Income may also result from the settlement of other liabilities from Bank Indonesia policy implementation. Expenses 98. The definition of expenses encompasses both expenses and losses that arise during the course of Bank Indonesia‟s ordinary activities. Expenses incurred during the course of Bank Indonesia‟s ordinary activities include, for example, monetary operations expenses, government demand deposit expenses, and salary expenses. These expenses usually take the form of increased liabilities, such as demand deposits or currency in circulation. 18 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
26. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 99 . Losses represent other items that meet the definition of expenses that may or may not arise during in the normal course of Bank Indonesia‟s activities. Losses represent decreases in economic benefits and as such they are no different in nature from other expenses. Hence, they are not regarded as a separate element in these fundamental principles. 100. The definition of expenses in Bank Indonesia statement of surplus/deficit does not include unrealised losses, such as those arising from changes in the fair value of assets and liabilities or the financial impact of Bank Indonesia unique transactions that have yet to achieve their ultimate objectives. 101. Losses recognised in the statement of surplus/deficit are recorded separately as information on these items is useful for decision-making, but immaterial. Losses are reported in gross amounts, prior to the deducting of the relevant expenses, except where immaterial. Recognition of the Elements of Financial Statements 102. Recognition is the process of creating an item that meets the definition of an element and satisfies the criteria for recognition set out in paragraph 103, in the Bank Indonesia statement of financial position or statement of surplus/deficit. Recognition is done by stating the item, both in words and the monetary amount, and presenting them in the statement of financial position or statement of surplus/deficit. Items that satisfy the recognition criteria must be recognised in the statement of financial position or statement of surplus/deficit. A failure to recognise such an item cannot be rectified through the disclosure of the accounting policies used nor by notes or explanatory material. 103. An item that meets the definition of an element must be recognised if: (a) it is probable that the economic benefits associated with the item will flow to or from Bank Indonesia and the national economy; and (b) the item has a value or cost that can be measured with reliability. 104. In assessing whether an item meets these criteria and therefore qualifies for recognition in the statement of financial position or statement of surplus/deficit, regard needs to be given to the materiality considerations discussed in paragraphs 44 and 45. The interrelationship between the elements means that An item that meets the definition and recognition criteria for a particular element, for example, an asset, this will automatically requires the recognition of other elements, for example, income or liability. 19 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
27. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 The Probability of Future Economic Benefits and the Compatibility of Economic Benefits with the Achievement of Bank Indonesia ’s Objective 105. In the revenue-recognition criteria, the concept of probability refers to the degree of uncertainty as to whether the future economic benefits associated with an item will flow to or from Bank Indonesia and the national economy. This concept is intended to respond to the uncertain environment in which Bank Indonesia operates. Assessment of the degree of uncertainty attaching to the flow of future economic benefits is made on the basis of the evidence available when the financial statements are prepared. 106. In the revenue recognition criteria described in paragraph 103 point a, Bank Indonesia‟s endeavours to achieve its objective may affect the timing of transaction realisation, i.e., when the economic benefits associated with a particular item flow to Bank Indonesia and the national economy. The realisation of the transaction or the time when the economic benefits flow to or from an entity occurs when the objective of the transaction has been achieved. In general, the purpose of a transaction is achieved at the time when the transaction is executed. However, Bank Indonesia operations can lead to the ultimate purpose of a transaction not being immediately achieved when the transaction is executed. This is because Bank Indonesia‟s operations may intend to, directly or indirectly, affect the stability of Rupiah value. If a Bank Indonesia operation is intended to directly affect the stability of Rupiah value, the ultimate objective of related transactions will generally be achieved when the transaction is executed. However, if a Bank Indonesia operation is not intended to directly affect the stability of Rupiah value, the ultimate objectives of related transactions will generally not be achieved when the transaction is executed. 107. For example, Bank Indonesia may conduct a transaction that arise other liabilities from Bank Indonesia policy implementation in the form of interest payments on debt instruments issued by Bank Indonesia so as to influence the money supply. Such a transaction is a consequence of Bank Indonesia policy to directly affect the stability of Rupiah value. Therefore, the ultimate objective of the transaction is achieved at the time the transaction is executed, simultaneously arise interest payment obligations. Another example, Bank Indonesia may conduct transactions involving a number of currencies so as to maintain the composition of its foreign exchange reserves and support the efforts of Bank Indonesia to achieve and maintain the value of the rupiah in the future. However, it is long term policy and accordingly no longer constitutes part of the composition of foreign exchange reserves but rather is converted into rupiah. Consequently, the principal purpose of such currency transactions in maintaining the composition of foreign exchange reserves does not reflect their ultimate objective. The ultimate objective is achieved when foreign exchange reserves transactions are conducted as policy instruments to influence the Rupiah value. 20 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
28. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Reliability of Measurement 108 . The second criterion for the recognition of an item is that all costs or values that can be measured with reliability, as discussed in paragraphs 47 - 54 of these fundamental principles. In many cases, cost or value must be estimated. The use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability. When, however, a reasonable estimate cannot be made the item is not recognised in the in the statement of financial position or statement of surplus/deficit. For example, the expected proceeds from a lawsuit may meet the definition of both an asset and income, as well as the probability criterion for recognition. However, if it is not possible for the claim to be measured reliably, it should not be recognised as an asset or as income. Nevertheless, the existence of a claim must be disclosed in the notes, explanatory material, or supplementary schedules. 109. An item which, at a particular point in time, fails to meet the recognition criteria, as described in paragraphs 103, may qualify for recognition in the future the criterion for recognition in the future as a result of subsequent events or circumstances. 110. An item that has the essential characteristics of an element, but fails to meet the recognition criteria, needs to be disclosed in the notes, explanatory material, or in supplementary schedules. This is appropriate when knowledge of the item is considered to be relevant to the evaluation of the financial position and the surplus/deficit of Bank Indonesia by the users of financial statements. Recognition of Assets 111. An asset is recognised in the statement of financial position if it is probable that future economic benefits will flow to Bank Indonesia and / or the national economy and the asset has a cost or value that can be measured reliably. 112. An asset is not recognised in the statement of financial position if the expenditure has been incurred and it is considered improbable that economic benefits will flow to Bank Indonesia and / or the national economy beyond the current accounting period. As an alternative, a transaction of this nature may result in the recognition of an expense in Bank Indonesia statement of surplus/deficit. This treatment does not imply either that the intention of Bank Indonesia management in incurring expenditure was other than to generate future economic benefits for the entity or that management was misguided. The only consequence is that the degree of certainty that 21 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
29. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 economic benefits will flow to Bank Indonesia beyond the current accounting period is insufficient to warrant recognition of the asset . Recognition of Currency in Circulation 113. Currency in circulation is recognised in the statement of financial position if it is remaining as valid legal tender and not under the control of Bank Indonesia, in accordance with the legislation. Recognition of Implementation Other Liabilities from Bank Indonesia Policy 114. Other liabilities from Bank Indonesia policy implementation are recognised in the statement of financial position if there is a strong possibility they will give rise to other liabilities in the future or when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which the settlement will take place can be measured reliably. In practice, obligations under contracts that have not been executed by both parties are generally not recognised as liabilities in the financial statements. However, such obligations may meet the definition of others liabilities from Bank Indonesia policy implementation, provided the recognition criteria are met in the particular circumstances, may qualify for recognition. In such circumstances, the recognition of other liabilities from Bank Indonesia policy implementation entails recognition of related assets or expenses. Recognition of Revaluation Reserves 115. Revaluation reserves are recognised when there is a change in the fair value of assets and liabilities of Bank Indonesia and / or changes in the rupiah value of assets and liabilities of Bank Indonesia that are denominated in foreign currency, and / or the occurrence of a gain or loss on a Bank Indonesia unique transaction whose substantive economic objective has not yet been achieved at the time when the transaction was executed, such as currency translation differences arising out of adjustments in the composition of foreign currency assets. Recognition of Capital 116. Capital is recognised when it is determined in accordance with the legislation. Recognition of Income 117. Income is recognised in the statement of surplus/ deficit when an increase in future economic benefits related to an increase in an asset or a 22 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
30. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 decrease of other liabilities from Bank Indonesia policy implementation , and the realisation of revaluation reserves, resulting in an increase in the accumulated surplus/deficit, have occurred or the ultimate objective of a transaction has been achieved and can be measured reliably. 118. The procedures normally adopted in practice for recognizing income, for example, the requirement that revenue has been earned, are application of the recognition criteria contained in these fundamental principles. Such procedures are generally directed at restricting the recognition of income to items that can be measured reliably and have a sufficient degree of certainty. Recognition of Expenses 119. Expenses are recognised in the statement of surplus/deficit when a decrease in future economic benefits related to a decrease in an asset, increase in other liabilities from Bank Indonesia policy implementation, and realisation of revaluation reserves, results in a decrease in the accumulated surplus/deficit, has occurred or has achieved the ultimate objective of the transaction and the transaction can be measured reliably. 120. The principle of matching cost against revenue is not emphasized in Bank Indonesia accounting as it is in commercial accounting. 121. Expenses that provide benefit in more than one accounting period may be recognised in Bank Indonesia statement of surplus/deficit on the basis of a rational and systematic allocation procedure. This is often necessary in recognising the expenses associated with the using up of asset. In these cases the expense is referred to as depreciation or amortisation. These allocation procedure procedures are intended to recognise expenses in the accounting period in which the economic benefits associated with these items are consumed or expire. 122. An expense is recognised immediately in Bank Indonesia statement of surplus/deficit when an expenditure produces no future economic benefits or when, and to the extent that, future economic benefits do not qualify, or cease to qualify, for recognition in the statement of financial position as an asset. 123. An expense is also recognised in the Bank Indonesia statement of surplus/deficit when a liability is incurred without the recognition of an asset. 23 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
31. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 MEASUREMENT OF ELEMENTS OF FINANCIAL STATEMENTS 124 . Measurement is the process of determining monetary amounts at which the elements of the financial statements are to be recognised and carried in Bank Indonesia statement of financial position and statement of surplus/deficit. This process involves the selection of the particular basis of measurement to reflect the fair value of each element of the financial statements. Fair value is the value for which the asset can be exchanged, or a liability settled, between knowledgeable parties that are willing to engage in arm's length transactions. 125. Conceptually, there are two basic measurement models that can be used in the preparation of the Bank Indonesia financial statements, namely: (a) the historical accounting model; and (b) the current value accounting model. 126. In the historical accounting model, the measurement of each element of the financial statements, both the initial measurement and measurement after initial recognition, uses fair value at the acquisition date. Assets are recorded in the amount of cash (or cash equivalent) paid or the fair value of the consideration given to acquire the asset at the time of acquisition. Liabilities are recorded at the amount of proceeds received in exchange for an obligation or, in certain circumstances, the amount of cash (or cash equivalent) that is expected to be paid in order to satisfy the liability in the normal course of business. 127. In the current value accounting model, each element of the financial statements is measured using current fair value. At initial recognition, fair value is the same as acquisition fair value or historical cost. However, after initial recognition, the current fair value of the elements of the financial statements may differ from the fair value at acquisition. A variety of bases may be used to measure current fair value, including the following: (a) Current cost or entry price or replacement cost. Assets are carried at the amount of cash (or cash equivalents) that would have to be paid if the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently (b) Realisable / settlement value or exit price or selling price. Assets are carried at the amount of cash (or cash equivalents) that could currently be obtained by selling the asset in an orderly disposal. Liabilities are carried at their settlement values; that is, the undiscounted amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business. (c) Present value or discounted present value. Assets are carried at the present discounted value of the future net cash inflows that the item is 24 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
32. FUNDAMENTAL PRINCIPLES FOR THE PREPARATION AND PRESENTATION OF BANK INDONESIA FINANCIAL STATEMENTS ------------------------------------------------------------------------------------------------------------------------------------1 2 3 4 expected to generate in the normal course of business . Liabilities are carried at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities in the normal course of business. 25 ------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
33. STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 01 ACCOUNTING POLICIES
34. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Committee (“KAKBI Committee”) approved and adopted the Statement of Financial Accounting Policy No. 01 at its meeting on 20 December 2013. Jakarta, 20 December 2013 KAKBI Committee Steering Board Rosita Uli Sinaga Mubarakah Chair Deputy Chair Perry Warjiyo Member Ahmad Hidayat Member Marsuki Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member
35. TABLE OF CONTENTS Paragraph INTRODUCTION ........................................................................................ 01-04 Objective ............................................................................................................ 01 Scope .............................................................................................................02-04 ACCOUNTING POLICIES ............................................................................ 05-15 Selection and Application of Accounting Policies ............................................05-14 Consistency of Accounting Policies...................................................................... 15 TRANSITIONAL PROVISIONS ......................................................................... 16 EFFECTIVE DATE .......................................................................................... 17
36. PKAK 01 : ACCOUNTING POLICIES --------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 01 ACCOUNTING POLICIES Statement of Financial Accounting Policy (PKAK) 01 consists of paragraphs 1-17. All of the paragraphs in this Statement are equally binding. The paragraphs that are printed in bold type and italics set out the main principles. PKAK 01 must be read in conjunction with the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements. It is not mandatory for this Statement to be applied to elements that are not material. INTRODUCTION Objective 01. The objective of this Statement is to prescribe the criteria for selecting accounting policies and determining the application of accounting policies. This Statement is intended to enhance the relevance and reliability of the financial statements of Bank Indonesia as well as the comparability of financial statements over time. Scope 02. This Statement shall be applied in selecting and applying accounting policies. 03. The following terms are used in this Statement: Accounting policies are the specific principles, bases, conventions, rules and practices applied by Bank Indonesia in preparing and presenting financial statements. The Conceptual Framework for the Preparation and Presentation of Financial Statements (KDP2LK) is the concepts that are contained in the general accounting standards that provide the basis for the preparation and presentation of the financial statements. The Conceptual Framework for the Preparation and Presentation of Sharia-Compliant Financial Statements (KDP2LK Sharia) is the concepts that are contained in the sharia accounting standards that provide the basis for the preparation and presentation of sharia-based financial statements. 1.1 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
37. PKAK 01 : ACCOUNTING POLICIES --------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Material Omissions or misstatements in recording items in the financial statements are material if they could, individually or collectively, influence the economic decisions of financial Statement users. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item in the financial statements, or a combination of both, could be the determining factor. Statements of Financial Accounting Policy (PKAK) is regulation of financial accounting policies, including recognition, measurement, presentation and disclosure for each class of financial transactions and events that affect the financial condition of Bank Indonesia. The PKAK is issued by the Bank Indonesia Financial Accounting Policies Committee. Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK) is a conceptual framework for determining, among other things, the elements, qualitative characteristics, basic concepts, assumptions, and limitations in the preparation and presentation of Bank Indonesia‟s financial statements, including guidelines for the adoption of generally accepted financial accounting standards. General accounting standards (GAS) are statements and interpretations issued by the Indonesian Institute of Accountants‟ Financial Accounting Standards Board. Sharia accounting standards (SAS) are statements and interpretations issued by the Indonesian Institute of Accountants’ Sharia Accounting Standards Board. 04. Assessing whether an omission or misstatement could influence the economic decisions of users, and so be material, requires consideration of the characteristics of those users. Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK) state in paragraph 40 that "Users are assumed to have a reasonable knowledge of the objective of Bank Indonesia and its impact on financial reporting of Bank Indonesia, and to have the ability to study the information in question." Therefore, the assessment needs to consider how users will be rationally influenced in their decision-making. 1.2 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
38. PKAK 01 : ACCOUNTING POLICIES --------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 ACCOUNTING POLICIES Selection and Application of Accounting Policies 05. When a Statement of Accounting Policy (PKAK) specifically applies to a transaction, other event or condition, the accounting policy applied to that item shall be determined by applying the PKAK. 06. PKAKs set out accounting policies to result in financial statements containing relevant and reliable information about the transactions, other event or conditions. Those policies need not be applied when the effect of applying them is immaterial. However, it is inappropriate to make or, leave uncorrected, departures from PKAKs to achieve a particular presentation on the financial position and surplus deficit. 07. PKAKs are accompanied by guidelines to assist Bank Indonesia in applying the requirements set out in the PKAK. Guidance that is an integral part of PKAKs s is mandatory. By contrast, guidance that is not an integral part of PKAKs does not contain requirements for financial statements. 08. In the absence of a PKAK that specifically applies to a particular transaction, other event or condition, and no specific GAS or SAS can be referenced, Bank Indonesia shall use its judgment in developing and applying an accounting policy that result in information that is: a. relevant to the decision-making needs of users; and b. reliable, in that the financial statements: i. represent faithfully the financial position and surplus deficit; ii. reflect the economic substance of transactions, other events and conditions, and not merely their legal form; iii. are neutral, i.e., free from bias; iv. are prudent; and v. are complete in all material respects. 09. In making the judgment described in paragraph 08, Bank Indonesia shall: a. identify and define the transaction, other events and conditions as being a conventional or sharia-compliant transactions, other events and conditions; and b. identify and define the transaction, other events and conditions as a unique or non-unique transaction, other events and conditions; and c. consider references from a variety of sources, as described in paragraphs 10 to 13. 1.3 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
39. PKAK 01 : ACCOUNTING POLICIES --------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 10. For a transaction, other events and conditions that is conventional and unique, Bank Indonesia shall consider the following sources in descending order of priority: a. the requirements and guidance in the PKAK for dealing with similar and related issues; b. the definitions, recognition criteria and measurement concepts for assets, liabilities, income, and expenses in Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK); c. the accounting guidelines used by other central banks; and d. the requirements and guidance set out in the GAS for dealing with similar and related issues, where these are capable of reflecting the purpose of the transaction as conducted by Bank Indonesia. 11. In the case of transactions, other events and conditions that are conventional and non-unique, Bank Indonesia shall consider the following resources in descending order of priority: a. the requirements and guidance set out in the GAS for dealing with similar and related issues; and b. the definitions, recognition criteria and measurement concepts for assets, liabilities, income, and expenses in The Conceptual Framework for the Preparation and Presentation of Financial Statements (KDP2LK). 12. For transactions, other events and conditions that are sharia-compliant and unique, Bank Indonesia shall comprehensively consider: a. Bank Indonesia‟s objective; b. the economic and legal substance of the transactions, other events, or conditions; c. the accounting treatment, based on the accounting standards, that is applied to similar transactions, events, or other conditions by other entities; d. generally accepted sharia accounting principles; and the opinion of the competent authority for assessing sharia-compliant transactions. 13. For transactions, other events, or conditions that are shariacompliant and non-unique, Bank Indonesia shall consider the following sources in descending order of priority: a. the requirements and guidance set out in the SAS for dealing with similar and related issues; 1.4 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
40. PKAK 01 : ACCOUNTING POLICIES --------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 b. the definitions, recognition criteria and measurement concepts applicable to assets, liabilities, income, and expenses in The Conceptual Framework for the Preparation and Presentation of Sharia-Compliant Financial Statements (KDP2LK Sharia); and c. the requirements and guidance set out in the GAS, which are in accordance with the SAS, for dealing with similar issues. 14. In making the judgment described in paragraph 08 above, Bank Indonesia also consider the current accounting standards issued by accounting standards bodies, or as described in the accounting literature, to the extent that these do not conflict with the references described in paragraphs 10 to 13. Consistency in Accounting Policy 15. Bank Indonesia selects and applies accounting policies in a consistent manner to similar transactions, other events and conditions, except where a PKAK specifically governs or permits the grouping of items subject to different accounting policies is appropriate. If a PKAK governs or permits such grouping, the appropriate accounting policies are selected and applied consistently to each group. TRANSITIONAL PROVISIONS 16. This Statement shall apply prospectively. EFFECTIVE DATE 17. This Statement shall be effective counting from such date as may be stipulated by Bank Indonesia Board of Governors‟ Regulation. 1.5 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
41. STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 02 PRESENTATION OF FINANCIAL STATEMENTS
42. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Preparatory Committee (“KAKBI Committee”) approved and adopted the Statement of Financial Accounting Policy No. 02 at its meeting on 20 December 2013. Jakarta, 20 December 2013 KAKBI Committee Steering Board Rosita Uli Sinaga Mubarakah Chair Deputy Chair Hendar Member Ahmad Hidayat Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member Dwi Martani Member
43. TABLE OF CONTENTS Paragraph INTRODUCTION ........................................................................................ 01-05 Objective ............................................................................................................. 01 Scope .............................................................................................................02-04 Definitions .......................................................................................................... 05 FINANCIAL STATEMENTS ......................................................................... 06-34 Purpose of the Financial Statements ................................................................... 06 Components of Complete Set of Financial Statements....................................07-08 Responsibility for Financial Statements .............................................................. 09 General Characteristics .................................................................................10-34 Fair Presentation and Compliance with PKAK .............................................10-15 Accrual Basis .............................................................................................16-17 Materiality and Aggregation ........................................................................18-20 Offsetting ....................................................................................................21-24 Reporting Frequency........................................................................................ 25 Comparative Information ............................................................................26-32 Consistency of Presentation ........................................................................33-34 STRUCTURE AND CONTENT ..................................................................... 35-82 Introduction ...................................................................................................35-36 Identification of Financial Statements ............................................................37-41 Statement of Financial Position......................................................................42-49 Information to be presented in the Statement of Financial Position ............42-47 Information to be presented in the Statement of Financial Position or the Notes to Financial Statements ..............................................................................48-49 Statement of Surplus Deficit ..........................................................................50-58 Information to be presented in the Statement of Surplus Deficit .................50-57 Information to be presented in the Statement of Surplus Deficit or Notes to Financial Statements ....................................................................................... 58 Notes to Financial Statements .......................................................................59-82 Structure ....................................................................................................59-63 Disclosure of Accounting Policies ................................................................64-71
44. Sources of Estimation Uncertainty that Affects Carrying Value ...................72-80 Revaluation Reserves, Capital, Surplus and Accumulated Deficit .................... 81 Other Disclosures ............................................................................................ 82 TRANSITIONAL PROVISIONS ......................................................................... 83 EFFECTIVE DATE .......................................................................................... 84
45. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 02 Presentation of Financial Statements Statement of Financial Accounting Policy (PKAK) 02 consists of paragraphs 1-84. All of the paragraphs in this Statement are equally binding. The paragraphs that are printed in bold type and italics set out the main principles. PKAK 02 must be read in the context of regulation objectives and in conjunction with the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements. PKAK 01: Accounting Policies describes the basis for the selection and application of accounting policies if no specific PKAK is applicable. It is not mandatory for this Statement to be applied to elements that are not material. INTRODUCTION Objective 01. The objective of this Statement is intended to govern the basis for the presentation of general purpose financial statements of Bank Indonesia, hereinafter referred to as “the financial statements,” so ensure comparability with the entity's financial statements of previous periods. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. Scope 02. Bank Indonesia shall apply this Statement in preparing and presenting general purpose financial statements in accordance with the PKAK. 03. Other PKAKs set out the recognition, measurement and disclosure for specific transactions and other events. 04. Should Bank Indonesia prepare interim financial statements, full or condensed interim financial statements may be presented. This Statement does not apply to the structure and content of condensed interim financial statements, which are prepared in accordance with the GAS on Interim Financial Statements, having regard to PKAK 07: Non-Unique Transactions. However, paragraphs 10-24 apply to condensed interim financial statements. 2.1 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
46. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Definitions 05. The following terms are used in this Statement: Accumulated surplus deficit is the surplus / deficit in the current period and prior periods. Notes to financial statements. The notes to financial statements contain additional information to that presented in the statement of financial position and statement of surplus deficit. The notes to financial statements provide narrative descriptions of the items presented in the financial statements and information about items that do not qualify for recognition in the financial statements. General purpose financial statements (hereinafter referred to as “financial statements”) are financial statements that are intended to meet the needs of most users of the financial statements. Interim financial statements are a complete set of financial statements (as governed by this Statement) or condensed financial statements (as governed by the GAS on Interim Financial Statements, having regard to PKAK 07: Non-Unique Transactions) for an interim period. Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions of financial statement users. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the items in the financial statements, or a combination of both, could be the determining factor. Assessing whether an omission or misstatement could influence the decisions of users of the financial statements, and thus be material, requires a consideration of the characteristics of each user of the financial statements. Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK) state in paragraph 40 that users are assumed to have a reasonable knowledge of the objective of Bank Indonesia and its impact on financial reporting by Bank Indonesia, and to have the ability to study the information in question. Capital is the capital of Bank Indonesia as stipulated by the legislation. 2.2 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
47. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Statements of Financial Accounting Policy (PKAK) is regulation financial accounting policies, including recognition, measurement, presentation and disclosure for each class of financial transactions and events that affect the financial condition of Bank Indonesia. Fundamental Principles for the Preparation and Presentation of Financial Statements (PDP2LK) is a conceptual framework for determining, among other things, the objectives, elements, qualitative characteristics, basic concepts, assumptions, and limitations in the preparation and presentation of Bank Indonesia financial statements, including guidelines for the adoption of generally applicable financial accounting standards. Revaluation reserves are the cumulative change in the fair value of the assets and liabilities of Bank Indonesia or the financial effects of Bank Indonesia unique transactions where such transactions have yet to achieve their ultimate objectives. The components of revaluation reserves include: (a) gains and losses arising from translating of foreign currency assets and liabilities into rupiah due to exchange rate changes; and (b) gains and losses from changes in the fair value of an asset or liability. General accounting standards (GAS) are statements and interpretations issued by the Indonesian Institute of Accountants‟ Financial Accounting Standards Board. Surplus deficit is income less expenses. Impracticable. Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. FINANCIAL STATEMENTS Purpose of the Financial Statements 06. Bank Indonesia financial statements are a structured representation of the financial effects of Bank Indonesia policy. The objective of the financial statements is to demonstrate the achievements of Bank Indonesia, or Bank Indonesia‟s accountability, in achieving and maintaining Rupiah value stability, which includes information on the impact of Bank Indonesia‟s policies on the financial position and surplus deficit of Bank 2.3 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
48. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Indonesia. In order to fulfil this purpose, the financial statements provide information about Bank Indonesia that includes: (a) assets; (b) liabilities; and (c) income and expenses, including gains and losses. This information, along with other information contained in the notes to financial statements, assists users of the financial statements in understanding the financial position and surplus deficit of Bank Indonesia. Components of Complete Set of Financial Statements 07. BI presents a complete set of financial statements consisting of the following components: (a) a statement of financial position as at the end of the period; (b) a statement of surplus deficit for the period; and (c) notes to financial statements, comprising a summary of significant accounting policies and other explanatory information. 08. Apart from the financial statements, Bank Indonesia may also present other information that will be useful to users in understanding the Bank's financial statements, such as a weekly condensed statement of financial position. The presentation of such other information is outside the scope of the PKAK. Responsibility for Financial Statements 09. The Board of Governors of Bank Indonesia is responsible for the preparation and presentation of the financial statements of Bank Indonesia. General Characteristics Fair Presentation and Compliance with PKAK 10. The financial statements shall present fairly the financial position and surplus deficit of Bank Indonesia. Fair presentation requires the faithful presentation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK). The application of 2.4 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
49. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 PKAKs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. 30 31 32 33 34 35 36 37 38 39 40 41 14. In the extremely rare circumstances, when Bank Indonesia concludes that compliance with a requirement in PKAK would be so misleading that it would conflict with the objective of financial statements set out in the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK), then Bank Indonesia shall, in so far as possible, act to rectify the incorrect understanding by disclosing: (a) the name of the relevant PKAK, the nature of the departure, and the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial 11. Compliance with the PKAK in the preparation of the financial statements is stated explicitly and without exception in the notes to financial statements. Bank Indonesia shall not describe the financial statements have been prepared in accordance with the PKAK unless they comply with all the requirements of the PKAK. 12. In virtually all circumstances, Bank Indonesia achieves fair presentation of the financial statements in compliance with the relevant PKAK. Fair presentation also requires Bank Indonesia to: (a) select and apply accounting policies in accordance with PKAK 01: Accounting Policies. PKAK 01 sets out a hierarchy of authoritative references to be considered by Bank Indonesia in the absence of a PKAK that specifically applies to an item. (b) present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information. (c) provide additional disclosures when compliance with the specific requirements of the PKAK are insufficient to enable users of the financial statements to understand the effects of transactions, other events and conditions on the financial position and surplus deficit of Bank Indonesia. 13. Bank Indonesia cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by disclosure in the notes to financial statements, or explanatory material. 2.5 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
50. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 (b) Statements (PDP2LK); and for each period presented, the adjustments to each item in the financial statements that Bank Indonesia has concluded would be necessary to achieve fair presentation. 15. For the purposes of applying paragraph 14, an item of information would conflict with the objective of financial statements when it does not represent faithfully the transactions, other events and conditions that it either purports to represent or could reasonably be expected to represent and, consequently, it would be likely to influence economic decisions made by users of financial statements. When assessing whether complying with a specific requirement in a PKAK would be so misleading that it would conflict with the objective of the financial statements, as set out in the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK), Bank Indonesia will consider the reasons the purposes of the financial statements will not be achieved in such circumstances. Accrual basis 16. Bank Indonesia prepares its financial statements using accrual basis. 17. As accrual based accounting is used, Bank Indonesia recognises items as assets, liabilities, income, and expenses (the elements of the financial statements) when they satisfy the definition and recognition criteria for those elements in the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK). Materiality and Aggregation 18. Bank Indonesia shall present separately each material class of similar items and sub-items. This is based on Bank Indonesia‟s duties and/or differing characteristics, unless they are immaterial. 19. The financial statements are the result of processing transactions and other events that are classified based on the duties and/or nature of Bank Indonesia. The final stage of the process of aggregation and classification is presentation in the financial statements. If a particular item or sub-item classification is not material, it may be aggregated with other similar items or sub-items in the financial statements or in the notes to financial statements. An item or sub-item may not be sufficiently material to 2.6 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
51. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 be presented separately in the financial statements but may be sufficiently material to be presented separately in the notes to financial statements. 20. Bank Indonesia need not provide a specific disclosure required by a PKAK if the information is not material. Offsetting 21. Bank Indonesia shall not offset the assets and liabilities or income and expenses, unless required or permitted by a PKAK. 22. Bank Indonesia reports separately both assets and liabilities, and income and expenses. Offsetting in the statement of surplus deficit or statement of financial position reduces the ability of users of the financial statements to better understand the transactions, events, and other conditions that have occurred, and to understand the financial effects of Bank Indonesia policies in the effort to achieve and maintain the stability of Rupiah value, except when offsetting reflects the substance of the transaction or event. Measuring asset net of valuation allowance (i.e., allowance for doubtful accounts) is not offsetting. 23. Gains recognised in the Bank Indonesia statement of surplus deficit are recorded separately as information on these items is useful in decision-making, except those are not material. Gains are reported in gross amounts, before deducting the relevant expenses, except those are not material. For example, when Bank Indonesia sells fixed asset and makes a gain from the sale, then the cost of the transaction, if material, is presented separately. 24. Bank Indonesia presents gains and losses arising from groups of similar transactions on a net basis, such as gains and losses on foreign exchange transactions. Frequency of Reporting 25. Bank Indonesia shall present a complete set of financial statements (including comparative information) at least annually. When Bank Indonesia changes the end of its reporting period and presents financial statements for a period that is longer or shorter than one year, in addition to the period covered by the financial statements, Bank Indonesia will also disclose: (a) the reason for using a longer or shorter period; and 2.7 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
52. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (b) the fact that the amounts presented in the financial statements are not entirely comparable. 29 30 31 32 33 34 35 36 37 38 39 40 41 29. If Bank Indonesia changes the presentation or classification of items or sub-items in the financial statements, Bank Indonesia shall reclassify comparative amounts unless such reclassification is impracticable. If Bank Indonesia reclassifies comparative amounts, then Bank Indonesia shall disclose: (a) the nature of the reclassification; (b) the amount of each item or sub-item, or combination of items or sub-items that were reclassified; and (c) the reason for the reclassification. Comparative information 26. Quantitative information is disclosed on a comparative basis with the previous period for all amounts reported in the current period's financial statements, unless otherwise required by the PKAK. Comparative information for narrative and descriptive information in the financial statements of the previous period is disclosed when it is relevant to a proper understanding of the current period‟s financial statements. 27. Bank Indonesia discloses comparative information by presenting at least two statements of financial position, two statements of surplus deficit, and notes to financial statements, including when Bank Indonesia applies accounting policies retrospectively or makes a retrospective restatement of items or sub-items in the financial statements or reclassifies items or sub-items in the financial statements. 28. In some cases, the narrative information presented in the financial statements for the previous period(s) continues to be relevant in the current period. For example, the current period details of a legal dispute whose outcome was uncertain at the end of the immediately preceding reporting period and that is yet to be resolved will need to be disclosed in the current period. Users will benefit from information on such uncertainty at the end of the previous reporting period, and on the steps that have been taken during the period to resolve the uncertainty. 30. When it is impracticable to reclassify comparative amounts, Bank Indonesia will disclose: (a) the reason for not reclassifying the amount, and 2.8 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
53. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 (b) the nature of the adjustments that would have been made if the amounts had been reclassified. 31. Enhanced inter-period comparability of information assists users in making economic decisions. In some circumstances, it is impracticable to reclassify comparative information for a particular prior period to achieve comparability with the current period. For example, Bank Indonesia may not have collected data in the prior period(s) in a way that allows reclassification, and it may be impracticable to recreate the information. 32. The GAS on Accounting Policies, Changes in Accounting Estimates and Misstatements, in accordance with PKAK 07: Non-Unique Transactions, sets out the adjustments to comparative information required when Bank Indonesia changes an accounting policy or corrects an error Consistency of Presentation 33. The presentation and classification of items and sub-items in the financial statements from one period to the next shall be carried out consistently, unless: (a) after a significant change has been made to Bank Indonesia‟s duties or after a review of the financial statements, it is apparent that another presentation or classification would be more appropriate, having regard to the criteria for the selection and application of accounting policies in PKAK 01: Accounting Policies; or (b) such change is permitted by a PKAK. 34. Changes in presentation are permitted if such changes provide reliable and more relevant information to users or where a new structure is likely to continue. If a change is made to the presentation of the financial statements, Bank Indonesia reclassifies comparative information in accordance with paragraphs 29 and 30. STRUCTURE AND CONTENT Introduction 35. This Statement requires specific disclosures in the statement of financial position or statement of surplus deficit, and also requires the disclosure of other items and sub-items in the financial statements or notes to financial statements. 2.9 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
54. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 36. This Statement sometimes uses the term "disclosure" in a broad sense, encompassing the items and sub-items that are presented in the financial statements. Disclosures are also required by other PKAKs. Unless otherwise stated in this Statement or in another PKAK, such disclosures may be made in the financial statements. Identification of Financial Statements 37. Bank Indonesia shall clearly identify the financial statements and distinguish them from other information in the same published document. 38. The PKAKs only apply to the financial statements, and not to other information presented in the annual report, the documents submitted to the House of Representatives and the government, or other documents. Therefore, it is very important that users can distinguish between information that is prepared in accordance with the PKAKs and other information that is also useful to users. 39. Bank Indonesia clearly identifies the statements of financial position, statement of surplus deficit, and the notes to financial statements. In addition, Bank Indonesia presents the following information clearly, and repeatedly, if needed, so it is understandable: (a) the name of Bank Indonesia as the party responsible for preparing the financial statements and any changes in the information from the end of the previous reporting period; (b) the date of the end of reporting period or the period covered by the financial statements or notes to financial statements; (c) the reporting currency, as defined in PKAK 03: Effects of Changes in Exchange Rates; and (d) the level of rounding used in presenting amounts in the financial statements. 40. Bank Indonesia has met the requirements of paragraph 39 by presenting appropriate headings for pages, the statement of financial position, the statement of surplus deficit, the notes to financial statements, columns, and the like. Judgment is required in determining the best way of presenting such information. For example, when Bank Indonesia presents the financial statements electronically, separate pages are not always used; further Bank Indonesia presents the matters referred to above so as to 2.10 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
55. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 ensure that the information contained in the financial statements can be readily understood. 41. To make the financial statements more readily understandable, Bank Indonesia‟s financial statements may present information using particular monetary units. This is acceptable as long as that Bank Indonesia discloses the level of rounding and does not omit material information. Statement of Financial Position Information to be presented in the Statement of Financial Position 42. The statement of financial position shall include, at a minimum, the following substantive items and sub-items: (a) gold (b) financial assets designated for monetary policy (i) financial assets denominated in Rupiah (ii) financial assets denominated in Rupiah – sharia (iii) financial assets denominated in foreign currency (c) claims (i) claims on government, and (ii) claims on banks (d) currency in circulation (e) financial liabilities designated for monetary policy (i) financial liabilities denominated in Rupiah (ii) financial liabilities denominated in Rupiah – sharia, and (iii) financial liabilities denominated in foreign currency (f) financial liabilities to government (g) revaluation reserves (h) capital (i) accumulated surplus / deficit 43. Bank Indonesia does not present assets in terms of current and non-current, or liabilities as short-term and long-term liabilities. Bank Indonesia also does not present assets and liabilities based on liquidity. 44. Bank Indonesia presents capital and accumulated surplus deficit in the statement of financial position as part of liabilities. and 45. Bank Indonesia presents additional items, sub-items, title subtotals in the statement of financial position if such 2.11 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
56. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 presentation is relevant to a proper understanding of the financial position of Bank Indonesia. 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 49. The details of the sub-classification of items and sub-items depend on the requirements of the PKAK and refer to paragraph 18. Disclosure is different for each sub-item, for example: (a) financial assets denominated in Rupiah are separated into repo claims, lending in Rupiah, and securities. (b) financial assets denominated in Rupiah - sharia are separated into repo claims, provision for financing facilities, and securities. (c) financial assets denominated in foreign currency are separated into securities, placements, claims, and Special Drawing Rights. (d) financial liabilities denominated in Rupiah are separated into securities issued by Bank Indonesia, fixed-term placements from banks, funds placements from banks, and repo obligations to banks. (e) financial liabilities denominated in Rupiah - sharia are separated into securities issued by Bank Indonesia, funds placements from banks, and repo obligations to banks. 46. This Statement does not set requirements for the sequence or format of presentation of items and sub-items. Paragraph 42 sets out a list of items and sub-items based on Bank Indonesia‟s duties and the nature of items and sub-items, so as to ensure separate presentation in the statement of financial position. In addition, an item and sub-item is presented separately if the relationship between that item and sub-item and Bank Indonesia‟s duties or the nature, or the size of the item and sub-item, or the aggregation of the item and sub-item in question means that separate presentation is relevant to ensuring a proper understanding of Bank Indonesia statement of financial position. 47. The use of different measurement bases for different classes of assets shows that assets functions related to Bank Indonesia‟s duties and the nature of assets are different. Accordingly, Bank Indonesia presents the different classes of assets separately. Information to be presented in the Statement of Financial Position or the Notes to Financial Statements 48. Bank Indonesia discloses in the statement of financial position or notes to financial statements, sub-classifications of items and sub-items that are presented. Such disclosures are classified in a manner appropriate to Bank Indonesia‟s operations. 2.12 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
57. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (f) financial liabilities denominated in foreign currency are separated into term placements, Special Drawing Right allocations, and foreign loans. 26 27 28 29 30 31 32 33 34 35 36 37 38 52. The presentation of income and expenses based on their relevance to the duties of Bank Indonesia and transaction nature helps the users of financial statements to understand the financial impact of each Bank Indonesia duty. Bank Indonesia incorporates additional items and sub-items in the statement of surplus deficit, changes in the nomenclature used and changes in the sequence of item and sub-item order if this is necessary so as to explain the financial impact of the execution of Bank Indonesia‟s duties. Bank Indonesia considers such factors as the relationship between income and expenses and Bank Indonesia‟s duties, and the nature and materiality of income and expenses. For example, Bank Indonesia may change the nomenclature employed so as to provide information that is relevant to the performance of its duties. Bank Indonesia is not allowed to offset income and expense unless the criteria set out in paragraph 21 are satisfied. 39 40 53. Bank Indonesia present separately items for income and expenses that arise from transactions or events that do not occur Statement of Surplus Deficit Information to be presented in the Statement of Surplus Deficit 50. The statement of surplus deficit shall, at a minimum, include the presentation of the following substantive items and subitems for the accounting period: (a) monetary policy income and expenses (i) interest income and expenses (ii) income and expenses from sharia-based transactions (iii) gains / losses on financial transactions (iv) foreign exchange gains / losses (b) income and expenses from payment system services (c) income and expenses from macro-prudential supervision (d) income from loans and financing (e) tax expenses (f) total surplus / deficit 51. Bank Indonesia presents additional items and sub-items, and subtotals in the statement of surplus deficit if such presentation is relevant to a proper understanding of the financial effects of Bank Indonesia‟s duties. 2.13 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
58. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 regularly, are not expected to occur frequently or regularly, and are beyond the control or influence of Bank Indonesia. 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Information to be presented in the Statement of Surplus Deficit or Notes to Financial Statements 54. Bank Indonesia is not allowed to present income and expenses as extraordinary items in the statement of surplus deficit nor in the notes to financial statements. 55. Bank Indonesia recognises all incomes and expense items during a current period in the statement of surplus deficit, except where required or permitted otherwise by the GAS on Accounting Policies, Changes in Accounting Estimates and Misstatements, in accordance with PKAK 07: Non-Unique Transactions related corrections of misstatements and the effect of such changes on accounting policies. 56. Bank Indonesia discloses the revaluation reserves that are recognised in the statement of surplus deficit for the current period. 57. Other PKAKs explain how and when amounts previously recognised in the revaluation reserves are recognised in the surplus deficit for the current period. For example, gains or losses from the disposal of foreign currency converted into rupiah are recorded in the surplus deficit for the current period. These amounts may have been recognised in the revaluation reserves in the current or prior periods. 58. When the items and sub-items of incomes and expenses are material, then Bank Indonesia discloses their nature and amounts separately. Notes to Financial Statements Structure (a) (b) 59. Notes to financial statements: present information about the basis of preparation of the financial statements and the specific accounting policies used, in accordance with paragraphs 63-70; disclose the information required by PKAKs that is not presented elsewhere in the financial statements; and 2.14 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
59. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 (c) provide information that is not presented elsewhere in the financial statements, where such information is relevant to a understanding of the financial statements having regard to the information cost-benefit considerations. 60. In so far as practicable, notes to financial statements are presented systematically. Bank Indonesia cross references each item and sub-item in the statement of financial position and statement of surplus deficit to any related information in the notes to financial statements. 61. Bank Indonesia presents notes to financial statements in the following order, to assist users to understand the financial statements: (a) a general description of Bank Indonesia policies that have a significant impact on Bank Indonesia financial statements; (b) a statement of compliance with the PKAKs (see paragraph 11); (c) a summary of significant Bank Indonesia accounting policies (see paragraph 64); (d) additional information for items and sub-items presented in the statement of financial position and statement of surplus deficit in the order in which each statement and each item and sub-item is presented; and (e) other disclosures, including: i. contingent liabilities (see GAS on Provisions, Contingent Liabilities and Contingent Assets, in accordance with PKAK 07: Non-Unique Transactions), and unrecognised contractual commitments; and ii. disclosure of non-financial information related to the performance of Bank Indonesia‟s duties. 62. In some circumstances, it may be necessary or desirable to vary the order of specific items and sub-items within the notes to financial statements. For example, Bank Indonesia may combine relevant information on Special Drawing Rights recognised as asset, and information on Special Drawing Right allocations that are recognised as liabilities in the statement of financial position. Nevertheless, Bank Indonesia retains a systematic structure for the notes to financial statements as far as practicable. 63. Bank Indonesia may present notes to financial statements providing information about the basis of preparation of the financial statements and specific accounting policies as a separate section of the financial statements. 2.15 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
60. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Disclosure of Accounting Policies 34 35 36 37 38 39 68. An accounting policy may be significant because of the nature of Bank Indonesia‟s operations, even though the amounts in the current period and prior periods are not material. Bank Indonesia may also disclose any accounting policy that is not specifically required by the PKAK but Bank Indonesia selects and applies in accordance with PKAK 01: Accounting Policies. 64. Bank Indonesia discloses in summary of its significant accounting policies: (a) the measurement basis (or bases) used in preparing the financial statements; (b) the other accounting policies used that are relevant to an understanding of the financial statements. 65. It is important for Bank Indonesia to inform users of the measurement basis or bases used in the financial statements (for example, historical cost, current acquisition cost, net realisable value, fair value or recoverable amount)as the measurement basis used in the preparation of the financial statements significantly affects users‟ analysis. When Bank Indonesia uses more than one measurement basis in the financial statements, for example, when particular classes of assets are revalued, it is sufficient to provide an indication of the categories of assets and liabilities to which each measurement basis is applied. 66. In deciding whether a particular accounting policy should be disclosed, Bank Indonesia considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in statement of surplus deficit and reported financial position. Disclosure of particular accounting policies is especially useful to users when those policies are selected from alternatives allowed in PKAKs. Some PKAK specifically require disclosure of particular accounting policies, including choices made by Bank Indonesia between different policies it allows. 67. Bank Indonesia considers the nature of each operation related to the achievement of objective of Bank Indonesia and estimates the accounting policies that the users of the financial statements would expect to be disclosed by Bank Indonesia. For example, the disclosure of accounting policies related to foreign exchange. 2.16 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
61. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 69. Bank Indonesia discloses, in the summary of significant accounting policies or other notes to financial statements, the judgments (apart from those involving estimations (see paragraph 72)), that Bank Indonesia has made in the process of applying accounting policies and that have the most significant effect on the amounts recognised in the financial statements. 70. In the process of applying accounting policies, Bank Indonesia makes various judgments (apart from those involving estimations) that can significantly affect the amounts it recognises in the financial statements. For example, Bank Indonesia makes judgments in classifying the financial instruments that it holds. 71. Some of the disclosures made in accordance with paragraph 69 are required by other PKAK. Sources of Estimation Uncertainty that Affects Carrying Value 72. Bank Indonesia discloses information about the assumptions it makes about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. In respect of those assets and liabilities, notes to financial statements include details of: (a) their nature; and (b) the carrying amount as at the end of the reporting period. 73. Determining the carrying amounts of some assets and liabilities requires an estimation of the effects of uncertain future events on those assets and liabilities at the end of the reporting period. For example, in the case of a provision that depends on the future outcome of ongoing litigation; future-oriented estimates are necessary so as to measure the recoverable amount in respect of a group of fixed assets when current market prices are not available; the impact of technological obsolescence on inventories; and long-term employee benefit liabilities, such as pension obligations. These estimates involve assumptions about the risk adjustment to cash flows and discount rates, and future changes in future changes in prices affecting other costs. 74. The assumptions and other sources of estimation uncertainty disclosed in accordance with paragraph 72 regarding estimations that require the most difficult, subjective and complex judgments by Bank 2.17 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
62. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Indonesia. As the number of variables and assumptions affecting the possible future resolution of the uncertainties increases, those judgements become more subjective and complex, and the potential for a consequential material adjustment to the carrying amounts of assets and liabilities normally increases accordingly. 75. The disclosures in paragraph 72, are not required for assets and liabilities where there is a significant risk that the carrying amounts of such assets and liabilities may change materially within the next financial year if, at the end of the reporting period, the assets and liabilities are measured at fair value based on recently observed market prices. The fair value may change materially during the next reporting period, but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting period. 76. Bank Indonesia presents the disclosures referred to in paragraph 72 in a manner that helps users of the financial statements to understand the judgments made by Bank Indonesia about the future and about other sources of estimation uncertainty. The nature and extent of the information provided vary according to the nature of the assumption and other circumstances. Examples of disclosures that are made in this respect include: (a) the nature of the assumption or other estimation uncertainty; (b) the sensitivity of carrying amounts to the methods, assumptions and estimates underlying their calculation, including the reasons for the sensitivity; (c) the expected resolution of an uncertainty and the range of possible outcomes in the next reporting period in respect of the carrying amounts of the assets and liabilities affected; and (d) explanation of the changes made to the previous assumptions related to these assets and liabilities, if the uncertainty remains unresolved. 77. This Statement does not require Bank Indonesia to disclose budget information or forecasts in making the disclosures required in paragraph 72. 78. Sometimes it is impracticable to disclose the impact that may arise from assumptions or other sources of estimation uncertainty at the end of the reporting period. In these circumstances, on the basis of existing knowledge, Bank Indonesia discloses that outcomes within the next financial year that are different from the assumption could require a material adjustment to the carrying amount of the asset or liability affected. In all 2.18 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
63. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 cases, Bank Indonesia discloses the nature and carrying amount of the specific asset or liability (or group of assets or liabilities) affected by the assumption. 79. The disclosures in paragraph 69 of particular judgments that Bank Indonesia made in the process of applying the accounting policies do not relate to the disclosures of sources of estimation uncertainty in paragraph 72. 80. Other PKAKs requires the disclosure of some of the assumptions that would otherwise be required by paragraph 72. For example, the GAS on Provisions, Contingent Liabilities and Contingent Assets, pursuant to PKAK 07: Non-Unique Transactions that require disclosure (under certain conditions) major assumptions concerning future events affecting classes of provision. PKAK 06: Policy-related Financial Instruments requires the disclosure of the significant assumptions used in estimating the fair value of Bank Indonesia assets and financial liabilities carried at fair value. Revaluation Reserves, Capital, and Accumulated Surplus Deficit 81. Bank Indonesia discloses the following information in notes to financial statements: (a) details of the amount of the revaluation reserves at the beginning and at the end of the period. Other PKAK explain how the amount of the revaluation reserves should be disclosed, and (b) details of capital in accordance with the provisions of the related regulations. Other Disclosures 82. Bank Indonesia discloses the following matters, if not disclosed in any part of the information published in conjunction with the financial statements: (a) the status of Bank Indonesia as a state institution and its legal basis, (b) the objective and duties of Bank Indonesia; and (c) the domicile and the address of Bank Indonesia‟s head office (or principal place of business, if different from the office address). 2.19 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
64. PKAK 02 : PRESENTATION OF FINANCIAL STATEMENTS ------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 TRANSITIONAL PROVISIONS 83. This Statement requires a restatement of the financial statements from the previous period so as to provide comparative information, having regard to PKAK 07: Non-Unique Transactions. EFFECTIVE DATE 84. Bank Indonesia shall apply this Statement in accordance with the financial year period stipulated by Bank Indonesia Board of Governors‟ Regulation. 2.20 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
65. STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 03 THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES
66. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Committee (“KAKBI Committee”) approved and adopted the Statement of Financial Accounting Policy No. 03 (on the Effects of Changes in Foreign Exchange Rates) at its meeting on 20 December 2013. Jakarta, 20 December 2013 KAKBI Committee Steering Board Rosita Uli Sinaga Mubarakah Chair Deputy Chair Perry Warjiyo Member Ahmad Hidayat Member Marsuki Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member
67. TABLE OF CONTENTS Paragraph INTRODUCTION ........................................................................................ 01-08 Objective ........................................................................................................01-02 Scope .............................................................................................................03-07 Definitions .......................................................................................................... 08 MEASUREMENT AND PRESENTATION CURRENCY AND FOREIGN CURRENCY TRANSACTIONS .................................................................................. 09-11 INITIAL RECOGNITION .................................................................................. 12 MEASUREMENT SUBSEQUENT TO INITIAL RECOGNITION ........................ 13-14 RECOGNITION OF FOREIGN EXCHANGE GAINS / LOSSES ........................ 15-18 TAX EFFECT ON FOREIGN CURRENCY REVALUATION RESERVES ................ 19 PRESENTATION AND DISCLOSURE .......................................................... 20-23 TRANSITIONAL PROVISIONS ........................................................................ 24 EFFECTIVE DATE ......................................................................................... 25
68. PKAK 03 : THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES -----------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 03 The Effects of Changes in Foreign Exchange Rates Statement of Financial Accounting Policy (PKAK) 03 consists of paragraphs 1-25. All of the paragraphs in this Statement are equally binding. The paragraphs that are printed in bold type and italics set out the main principles. PKAK 03 must be read in conjunction with the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements. PKAK 01: Accounting Policies describes the basis for the selection of accounting policies if no specific PKAK is applicable. It is not mandatory for this Statement to be applied to elements that are not material. INTRODUCTION Objective 01. Bank Indonesia conducts transactions that are denominated in foreign currency so as to achieve the Bank Indonesia‟s objective. The objective of this statement is to explain the currency to be used in measurement and presentation by Bank Indonesia and how to include foreign currency transactions in the financial statements of Bank Indonesia. 02. The principal issues are the measurement and presentation currency to be used by Bank Indonesia, the exchange rate(s) to use, and how to report the effects of changes in exchange rates in the financial statements. Scope 03. This Statement shall be applied in accounting for foreign currency transactions and balances in foreign currency denominated monetary account related to Bank Indonesia unique transactions. Accounting for foreign currency transactions and balances in foreign currency denominated monetary account related to Bank Indonesia non-unique transactions, including non-monetary items recorded in foreign currency, are governed by the GAS on The Effects of Changes in Foreign Exchange Rates, in accordance with PKAK 07: Non-Unique Transactions. 3.1 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
69. PKAK 03 : THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES -----------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 04. Examples of Bank Indonesia unique transactions include the acquisition or disposal of foreign currency denominated monetary assets for the purpose of conducting market interventions or to maintain the composition of foreign exchange reserves. The acquisition of foreign currency denominated monetary liabilities for the purpose of conducting market intervention or performing Bank Indonesia‟s function as the Government of Indonesia‟s banker is another example of a Bank Indonesia unique transaction. By contrast, foreign exchange transactions for the purchase of fixed assets, the payment of honorariums and official travel expenses are examples of Bank Indonesia non-unique transactions. 05. This Statement does not apply to accounting for derivative transactions and balances, which are covered by PKAK 06: Policyrelated Financial Instruments, and the GAS on the Recognition and Measurement of Financial Instruments, in accordance with PKAK 07: Non-Unique Transactions. 06. PKAK 06: Policy-related Financial Instruments, and the GAS on the Recognition and Measurement of Financial Instruments, in accordance with PKAK 07: Non-Unique Transactions apply to some foreign currency derivatives with the result that they are excluded from the scope of this Statement. Foreign currency derivatives that do not come within the scope of PKAK 06: Policy-related Financial Instruments, and the GAS on the Recognition and Measurement of Financial Instruments, in accordance with PKAK 07: Non-Unique Transaction, for example foreign currency derivatives that are inherent in other contracts, are within the scope of this Statement. 07. This Statement does not apply to foreign currency hedge accounting. PKAK 06: Policy-related Financial Instruments and the GAS on the Recognition and Measurement of Financial Instruments, in accordance with PKAK 07: Non-Unique Transactions apply to hedge accounting. Definitions 08. The following terms are used in this Statement: Exchange rate is the ratio of exchange for two currencies. Spot exchange rate is the exchange rate for immediate delivery, in the form of Bank Indonesia mid rate or transaction rate. 3.2 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
70. PKAK 03 : THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES -----------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Bank Indonesia mid exchange rate is the midpoint between Bank Indonesia buying and selling rates. Transaction exchange rate is the rate that is agreed upon by the parties to a transaction. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Monetary item is a unit of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency. Monetary items may consist of monetary assets and liabilities. The essential feature of a monetary item is a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. For example: (a) the variable amount of assets in which the fair value to be received (or delivered)equals a fixed or determinable number of units of currency; (b) a contract to receive (or deliver) a variable amount of liability instruments held; and (c) pensions and other employee benefits to be paid in cash. Conversely, the essential feature of a non-monetary item is the absence of a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. For example: (a) fixed assets; (b) advance payments for goods and services (e.g. prepaid rent); and (c) intangible assets. Exchange difference is the difference resulting from translating a given number of units of one currency into another currency at different exchange rates. Revaluation reserves are the cumulative changes in the fair value of assets and liabilities of Bank Indonesia, or the financial impacts of Bank Indonesia unique transactions where such transactions have yet to achieve their ultimate objectives. 3.3 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
71. PKAK 03 : THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES -----------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Foreign currency revaluation reserves are the cumulative exchange rate differences from currency translations during inter-foreign exchange transaction movements as financial impacts of Bank Indonesia unique transactions where such transactions have yet to achieve their ultimate objectives. 33 34 35 36 (a) (b) (c) General Accounting Standards (GAS) are statements and interpretations issued by the Indonesian Institute of Accountants‟ Financial Accounting Standards Board. Bank Indonesia unique transactions are: (a) transactions that are only found in Bank Indonesia as the central bank; and (b) transactions that are found in other entities, but conducted by Bank Indonesia with different objectives from other entities. Foreign currency is a currency other than rupiah. MEASUREMENT AND PRESENTATION CURRENCY TRANSACTIONS CURRENCY AND FOREIGN 09. The Rupiah is the currency that is used to measure all transactions and to present Bank Indonesia financial statements. 10. Bank Indonesia, as the central bank of the Republic of Indonesia, in accordance with Bank Indonesia‟s objective and common practice among central banks in other countries, measures all transactions and presents its financial statements in the national currency, namely, Rupiah. 11. Foreign currency transactions are transactions that are denominated or require settlement in a foreign currency, including transactions that arise when Bank Indonesia: acquires or disposes of foreign currency; incurs or settles debts denominated in foreign currency; or acquires or releases other monetary assets denominated in foreign currency. 3.4 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
72. PKAK 03 : THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES -----------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 INITIAL RECOGNITION 12. At the time of initial recognition, foreign currency amounts are calculated in Rupiah using the spot exchange rate on the date of the transaction. The spot rate for inter-foreign currency transactions is the Bank Indonesia mid exchange rate, while the spot exchange rate for Rupiah to foreign exchange transactions is the transaction exchange rate. Inter-foreign exchange transactions do not give rise to foreign exchange differences upon initial recognition. MEASUREMENT SUBSEQUENT TO INITIAL RECOGNITION 13. At the end of each reporting period, foreign currencydenominated monetary items balances are translated using the Bank Indonesia mid exchange rate at the end of the reporting period. 14. At the end of each reporting period, the difference between previous carrying amount and results of translation of foreign currency-denominated monetary items balances is recognised as a foreign currency revaluation reserve. RECOGNITION OF FOREIGN EXCHANGE GAINS / LOSSES 15. When foreign exchange transactions have achieved their ultimate objective, the balance of foreign currency revaluation reserves is recognised as a foreign exchange gain / loss in the statement of surplus deficit. 16. The ultimate objective of the transaction is achieved at the time the foreign currency is converted into rupiah or gold, or foreign currency-denominated liabilities are derecognised. 17. Examples of transactions that have achieved their ultimate objective include the release of United States dollars for the purpose of market interventions, or the settlement of monetary liabilities denominated in foreign currency. Another example is the purchase of gold by using foreign currency. 3.5 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
73. PKAK 03 : THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES -----------------------------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 18. The balance of foreign currency revaluation reserves is tracked based on inter-foreign exchange transaction movements so that when a foreign exchange transaction has achieved its ultimate objective, the foreign currency revaluation reserves balance that must be transferred to the statement of surplus deficit can be identified. The tracking of the foreign currency revaluation reserves balance is carried out systematically so as to ensure that the amount that is transferred to the statement of surplus deficit is reliable. TAX EFFECT ON FOREIGN CURRENCY REVALUATION RESERVE 19. The foreign currency revaluation reserves that are transferred as foreign exchange gains or losses to the statement of surplus deficit may have tax consequences. The GAS on Accounting for Income Tax, in accordance with PKAK 07: Non-Unique Transactions, applies to this tax effect. PRESENTATION AND DISCLOSURE 20. The foreign currency revaluation reserves are presented as part of the revaluation reserves in the statement of financial position. 21. Foreign exchange gains or losses are presented in the statement of surplus deficit. (a) (b) (c) 22. Bank Indonesia discloses: Bank Indonesia mid exchange rate used at the end of the reporting period. the accounting policies applied to foreign currency transactions and balances, including explanations on how the foreign currency revaluation reserves balance is tracked. reconciliation of the amount of foreign currency revaluation reserves at the beginning and end of the period. 23. Reconciliation of the foreign currency revaluation reserves, as referred to in paragraph 22(c), is disclosed by revealing: (a) total increase in the foreign currency revaluation reserves. (b) total reduction due to the transfer of a foreign exchange revaluation reserves when the foreign exchange transaction has achieved its ultimate objective. 3.6 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
74. PKAK 03 : THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES ------------------------------------------------------------------------------------------ 1 2 3 4 5 6 7 8 9 TRANSITIONAL PROVISIONS 24. This Statement shall apply prospectively, and shall apply to balances of monetary assets and liabilities existing on the effective date. EFFECTIVE DATE 25. This Statement shall be effective counting from such date as may be stipulated by Bank Indonesia Board of Governors‟ Regulation. 3.7 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
75. STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 04 GOLD
76. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Committee (“KAKBI Committee”) approved and adopted the Statement of Financial Accounting Policy No. 04 (on Gold) at its meeting on 20 December 2013. Jakarta, 20 December 2013 KAKBI Committee Steering Board Rosita Uli Sinaga Mubarakah Chair Deputy Chair Hendar Member Marsuki Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member
77. TABLE OF CONTENTS Paragraph INTRODUCTION ........................................................................................ 01-05 Background ........................................................................................................ 01 Objective ............................................................................................................. 02 Scope ............................................................................................................03-04 Definitions .......................................................................................................... 05 RECOGNITION .......................................................................................... 06-08 MEASUREMENT SUBSEQUENT TO INITIAL RECOGNITION ........................ 09-13 DERECOGNITION ...................................................................................... 14-18 PRESENTATIO ......................................................................................... 19-21 DISCLOSURE ............................................................................................ 22-23 TRANSITIONAL PROVISIONS ......................................................................... 24 EFFECTIVE DATE .......................................................................................... 25
78. PKAK 04 : GOLD -------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 04 Gold Statement of Financial Accounting Policy (PKAK) 04 consists of paragraphs 1-25. All of the paragraphs in this Statement are equally binding. The paragraphs that are printed in bold type and italics set out the main principles. PKAK 04 must be read in the context of regulation objectives and in conjunction with the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements. PKAK 01: Accounting Policies describes the basis for the selection and application of accounting policies if no specific PKAK is applicable. It is not mandatory for this Statement to be applied to elements that are not material. INTRODUCTION Background 01. Gold is part of Bank Indonesia‟s foreign reserves and is intended to, among other things, serve as a liquidity buffer to support the implementation of monetary policy and / or the fulfilment of obligations denominated in foreign currency. Management of Bank Indonesia‟s gold stocks differs from the management of other foreign exchange reserves. The management of other foreign exchange reserves is relatively more dynamic than is the case with gold management. The holding of gold represents a form of diversification of foreign exchange reserves that can help reduce the risk of volatility. In certain circumstances, Bank Indonesia may decide to release part of its gold reserves so as to support monetary policy or meet extraordinary liquidity needs. Therefore, the ultimate objective of Bank Indonesia‟s holding of gold is achieved when the gold is derecognised by Bank Indonesia. Objective 02. The objective of this Statement is intended to govern accounting for gold reserves. Scope 03. This Statement shall be applied in accounting for gold reserves. 4.1 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
79. PKAK 04 : GOLD -------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 04. This Statement does not apply to accounting for financial instruments that are denominated in gold exchange rate units. PKAK 06: Policy-related Financial Instrument is applied to accounting for financial instruments that are denominated in gold exchange rate units. Definitions 05. The following terms are used in this Statement: Gold is a precious metal gold that is held by Bank Indonesia. Gold may take the form of gold bar and contractual rights to gold bar. A contractual right to gold bar is a claim to a physical amount of gold bar to another party in respect of the placement of that gold bar. Contractual rights to gold bar may take the form of demand deposits on gold, gold deposits, and gold-based securities that are acquired and settled using gold bar. Financial instruments denominated in gold exchange rate units are financial instruments or other contracts whose value changes as a result of changes in the fair value of gold and does not require placement and / or settlement in the form of gold bar. Bank Indonesia mid exchange rate is the midpoint between Bank Indonesia buying and selling rates. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Revaluation reserves are the cumulative changes in the fair value of asset and liabilities of Bank Indonesia or the financial impact of Bank Indonesia unique transactions where such transactions have yet to achieve their ultimate objective. Gold revaluation reserves are the cumulative change in the fair value of gold. 4.2 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
80. PKAK 04 : GOLD -------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 RECOGNITION 06. Gold bar acquired by purchase is recognised at acquisition cost. If gold bar is purchased by using foreign currency, the cost of the gold bar acquisition is converted into Rupiah using Bank Indonesia mid exchange rate. 07. Gold bar acquired through the settlement of contractual rights to gold bar is recognised at fair value when received, which is calculated in Rupiah using Bank Indonesia mid exchange rate. 08. Contractual rights to gold bar are recognised at the fair value of the gold bar, which is calculated in Rupiah using Bank Indonesia mid exchange rate. MEASUREMENT SUBSEQUENT TO INITIAL RECOGNITION 09. At the end of each reporting period, the gold reserves balance is measured based on fair value, which is calculated in Rupiah using Bank Indonesia mid exchange rate at the end of the reporting period. The difference arising between the previous carrying amount and the amount that results from the translation of the balance is recognised as the gold revaluation reserves. 10. If on the reporting date, Bank Indonesia obtains objective evidence that the recoverability of gold placed at other parties is doubtful, then the gold balance shall be reduced by establishing a provision equal to the difference between the carrying amount and the estimated recoverable value of the gold. The gold revaluation reserves arising from the estimated amount of non-recoverable gold shall be eliminated. The total provision for the gold balance and the elimination of gold revaluation reserves are recognised as a net loss in the statement of surplus deficit. 11. When doubts arise as to the recoverability of gold, then doubts also arise as to whether the purpose of holding the gold can be achieved. Consequently, the related gold revaluation reserves are eliminated. 12. If on the reporting date Bank Indonesia obtains objective evidence that the doubts over the recovery of gold in a prior period no longer exist or have diminished, then the carrying amount is increased by the amount of gold that can be recovered by eliminating the 4.3 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
81. PKAK 04 : GOLD -------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 provision that was previously made. the resulting gain that is recorded in the statement of surplus deficit must not exceed the net loss calculated in accordance with paragraph 10. The difference between the increase in carrying amount of gold and the gain is recognised as gold revaluation reserves. 13. Objective evidence that gold may not be recovered includes the occurrence of the following adverse events: (a) significant financial difficulties are experienced by the counter party holding gold placement from Bank Indonesia; (b) breach of contract, such as a default or delinquency in returning gold bar or paying interest; (c) Bank Indonesia, for economic or legal reasons related to financial difficulties being experienced by the counter party holding a gold placement from Bank Indonesia, provides concessions that would not possibly be granted if the party was not experiencing such difficulties; (d) it is becoming probable that the party holding the gold placement from Bank Indonesia will be declared bankrupt or undergo a financial reorganisation; (e) the disappearance of an active market for gold-based securities due to financial difficulties facing the issuer; or (f) the observable data indicates a measurable decrease in the estimated amount of gold that is recoverable, although the decrease cannot as yet be verified, such as national or local conditions that could affect the recovery of gold bar placed by Bank Indonesia (e.g., an economic crisis, civil emergency or war). DERECOGNITION 14. Gold bar is derecognised upon release. Contractual rights to gold bar are derecognised upon settlement or when future economic benefits of ownership or settlement are no longer anticipated. 15. The release of gold bar can be carried out in various ways, such as through sale, its placement under contractual rights, or by way of exchange. The settlement of contractual rights to gold bar can be carried out in various ways, such as through sale, exchange, or expiry. 16. At the time of sale of gold, the difference between carrying amount and selling price is recognised as a gain or loss of current period. 4.4 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
82. PKAK 04 : GOLD -------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 17. At the time when gold is exchanged for another nonmonetary asset, the difference between carrying value of the gold and fair value of the non-monetary asset that is acquired is recognised as a gain or loss of current period. If the non-monetary assets acquired cannot be measured at fair value, its acquisition cost can be measured at the fair value of the gold that is delivered. 18. Upon the derecognition of gold, the gold revaluation reserves are recognised as a gain or loss of current period, except: (a) at the time when gold bar is placed under contractual rights; or (b) upon the settlement of contractual rights to gold bar through the return of the gold bar. PRESENTATION 19. Gold is presented in the statement of financial position as net after less any allowance of impairment. 20. Gold revaluation reserves are presented as part of the revaluation reserves in the statement of financial position. 21. Gold revaluation reserve that has been derecognised is presented as gains or losses in the statement of surplus deficit. DISCLOSURE 22. The following matters are disclosed in the notes to financial statements: (a) the accounting policy for gold bar measurement and contractual rights over gold bar; (b) explanations on increases or decreases in the gold balance; (c) reconciliation of the amount of gold revaluation reserves at the beginning and the end of the period; and (d) a description of the related objective evidence casting doubt on the recovery of gold, as discussed in paragraphs 10 and 12. 23. Reconciliation of gold revaluation reserves, as referred to in paragraph 22, is disclosed by indicating: (a) the increase or decrease in the gold revaluation reserve; and (b) the reductions due to the transfer of a gold revaluation reserves at the time that a transaction involving gold has achieved its ultimate objective. 4.5 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
83. PKAK 04 : GOLD -------------------1 2 3 4 5 6 7 8 9 10 TRANSITIONAL PROVISIONS 24. This Statement shall apply prospectively, and also shall apply to gold reserves balance existing on the effective date. EFFECTIVE DATE 25. This Statement shall be effective counting from such date as may be stipulated by Bank Indonesia Board of Governors‟ Regulation. 4.6 --------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
84. STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 5 CURRENCY IN CIRCULATION
85. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Committee (“KAKBI Committee”) approved and adopted the Statement of Financial Accounting Policy No. 05 (on currency in circulation) at its meeting on 20 December 2013. Jakarta, 20 December 2013 KAKBI Committee Steering Board Rosita Uli Sinaga Mubarakah Chair Deputy Chair Hendar Member Ahmad Hidayat Member Marsuki Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member
86. TABLE OF CONTENTS Paragraf INTRODUCTION ........................................................................................ 01-06 Background ...................................................................................................01-03 Objective ............................................................................................................. 04 Scope .................................................................................................................. 05 Definitions .......................................................................................................... 06 RECOGNITION .......................................................................................... 07-08 DERECOGNITION ...................................................................................... 09-11 MEASUREMENT ........................................................................................ 12-13 PRESENTATION ............................................................................................. 14 DISCLOSURE ................................................................................................. 15 TRANSITIONAL PROVISIONS ......................................................................... 16 EFFECTIVE DATE .......................................................................................... 17
87. PKAK 05 : CURRENCY IN CIRCULATION ----------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 05 40 41 04. The objective of this Statement is intended to govern accounting for Currency in Circulation. Currency in Circulation Statement of Financial Accounting Policy (PKAK) 05 consists of paragraphs 1-17. All of the paragraphs in this Statement are equally binding. The paragraphs that are printed in bold type and italics set out the main principles. PKAK 05 must be read in the context of regulation objectives and in conjunction with the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements. PKAK 01: Accounting Policies describes the basis describes the basis for the selection and application of accounting policies if no specific PKAK is applicable. It is not mandatory for this Statement to be applied to elements that are not material. INTRODUCTION Background 01. One of the duties of Bank Indonesia is for regulating and safeguarding the smooth operation of the National Payments System. 02. Under the provisions of the laws and regulations in effect, in order to carry out its duty of regulating and safeguarding the smooth operation of the payments system, Bank Indonesia is authorized to manage Rupiah currency, which includes planning, printing, issuing, distributing, revoking, withdrawing, and destructing of Rupiah Currency. Bank Indonesia coordinates with the government in terms of planning, printing and destructing Rupiah Currency. 03. Those aspects of destructing of Rupiah Currency management that affect the amount of currency in circulation in the public include the distribution, revoking and withdrawing destructing of Rupiah Currency. Rupiah Currency that is in circulation in public constitutes Currency in Circulation, reflecting one of Bank Indonesia‟s monetary obligations as the central bank to the public amounting to the nominal value of Rupiah. Objective 5.1 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
88. PKAK 05 : CURRENCY IN CIRCULATION ----------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Scope 05. This Statement applies to accounting for Currency in Circulation, which includes the distribution, revocation and withdrawal of Rupiah Currency. This Statement does not apply to transactions related to the planning, printing, issuance and destruction of Rupiah Currency Definitions 06. The following terms are used in this Statement: Currency in circulation is Rupiah Currency that is not under the control of Bank Indonesia. Rupiah Currency is legal tender issued by the Unitary Republic of Indonesia. Rupiah Currency Management refers to those activities involving the Planning, Printing, Issuing, Circulating, Revocating and Withdrawing, and Destructing of Rupiah Currency, which shall be conducted in an effective, efficient, transparent, and accountable manner. Planning is a series of activities designed to determine the amount and denominations of Rupiah Currency based on the need for Rupiah Currency at certain periods. Printing is a series activities involved in the printing of Rupiah Currency. Issuance is a series of activities related to the issuance of Rupiah Currency as the legal tender within the territory of the Unitary Republic of Indonesia. Circulation is a series of activities of circulation or distribution of Rupiah Currency within the territory of the Unitary Republic of Indonesia. Revocation and Withdrawal is a series of activities that result in Rupiah Currency being no longer valid as legal tender in the territory of the Unitary Republic of Indonesia. 5.2 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
89. PKAK 05 : CURRENCY IN CIRCULATION ----------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Destruction is a series of activities involving shredding, melting or other actions to destroy Rupiah Currency so that it no longer has the appearance of Rupiah Currency. RECOGNITION 07. Rupiah Currency is recognised as Currency in Circulation when it is not under the control of Bank Indonesia. 08. Rupiah Currency is treated as being beyond the control of Bank Indonesia at the time when a commercial bank and / or member of the public withdraws Rupiah Currency from Bank Indonesia. However, sometimes Rupiah Currency is entrusted by Bank Indonesia to a commercial bank in a particular location if Bank Indonesia does not have a branch office there. Such Rupiah Currency continues to be under the control of Bank Indonesia and is thus excluded from Currency in Circulation. It only becomes Currency in Circulation when the commercial bank (holding the Rupiah Currency deposit) and / or other member of the public withdraw it. DERECOGNITION 09. Currency in Circulation is derecognised if and only if Rupiah Currency: (a) comes under the control of Bank Indonesia again; or (b) has been declared invalid as legal tender due to its revocation and withdrawal from circulation and is no longer controlled by Bank Indonesia after a certain period of time has elapsed, in accordance with the provisions of the laws and regulations in effect. 10. Rupiah Currency comes under the control of Bank Indonesia again when the Rupiah is deposited to Bank Indonesia by third party. 11. At the time Bank Indonesia revokes and withdraws Rupiah Currency from circulation, public may exchange such Rupiah Currency for a certain period, as stipulated by the provisions of the laws and regulations in effect. After the exchange period has expired, public will no longer have a claim on Bank Indonesia in the amount of the nominal value of the Rupiah Currency. Therefore, Bank Indonesia derecognises the Rupiah Currency as Currency in Circulation. 5.3 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
90. PKAK 05 : CURRENCY IN CIRCULATION ----------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 MEASUREMENT 12. Currency in Circulation is measured in the amount of its nominal value as stated in denomination of Rupiah Currency. 13. Under the legislation, the price of Rupiah Currency is the nominal value stated on each denomination of Rupiah Currency. Consequently, a claim by a member of the public on Bank Indonesia in respect of Rupiah Currency represents the nominal value of each denomination that the member of the public holds. PRESENTATION 14. Currency in Circulation is presented as a liability on the Statement of Financial Position. DISCLOSURE 15. Bank Indonesia discloses the accounting policy applied to the recognition and measurement of Currency in Circulation. TRANSITIONAL PROVISIONS 16. This Statement shall apply prospectively, and also shall apply to Currency in Circulation as per the effective date. EFFECTIVE DATE 17. This Statement shall be effective counting from such date as may be stipulated by Bank Indonesia Board of Governors‟ Regulation. 5.4 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
91. STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 06 POLICY-RELATED FINANCIAL INSTRUMENTS
92. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Committee (“KAKBI Committee”) approved and adopted the Statement of Financial Accounting Policy No. 06 (Policy-related Financial Instruments) at its meeting on 20 December 2013. Jakarta, 20 December 2013 KAKBI Committee Steering Board Rosita Uli Sinaga Mubarakah Chair Deputy Chair Hendar Member Ahmad Hidayat Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member Dwi Martani Member
93. TABLE OF CONTENTS Paragraph INTRODUCTION ........................................................................................ 01-09 Objective ............................................................................................................. 01 Scope .............................................................................................................02-07 Definitions .....................................................................................................08-09 RECOGNITION AND DERECOGNITION ....................................................... 10-37 Initial Recognition ............................................................................................... 10 Regular Way Purchase or Sale of a Financial Asset ............................................. 11 Derecognition of a Financial Asset .................................................................12-33 Transfers that Qualify for Derecognition .................................................20-24 Transfers that do not Qualify for Derecognition ........................................... 25 Continuing Involvement in Transferred Assets ........................................26-31 All Transfers ...........................................................................................32-33 Derecognition of a Financial Liability .............................................................34-37 CLASSIFICATION ...................................................................................... 38-53 Classification of Financial Assets ...................................................................38-42 Option to Designate a Financial Asset at Fair Value through Revaluation Reserves ...................................................................................................... 42 Classification of Financial Liabilities ..............................................................43-44 Option to Designate a Financial Liability at Fair Value through Revaluation Reserves ...................................................................................................... 44 Embedded Derivatives....................................................................................45-51 Hybrid Contracts with Financial Asset Hosts ............................................... 46 Other Hybrid Contracts ..........................................................................47-51 Reclassification ..............................................................................................52-53 MEASUREMENT ........................................................................................ 54-86 Initial Measurement of Financial Assets and Financial Liabilities...................54-56 Subsequent Measurement of Financial Assets ...............................................57-59 Subsequent Measurement of Financial Liabilities ..........................................60-61 Amortised Cost Measurement ........................................................................62-63 Fair Value Measurement ..................................................................................... 64 Reclassification of Financial Assets ................................................................65-68
94. Gains and Losses ...........................................................................................69-74 Liabilities Designated as at Fair Value through Revaluation Reserves ............75-76 Impairment of Financial Assets ......................................................................77-80 Financial Assets Measured at Amortised Cost.........................................81-83 Financial Assets Measured at Fair Value through Revaluation Reserves .84-86 HEDGING ................................................................................................ 87-118 Qualifying Instruments ..................................................................................88-89 Designation of Hedging Instruments ..............................................................90-93 Hedged Items ............................................................................................... 94-101 Qualifying Instruments ...............................................................................94-96 Designation of Financial Items as Hedged Items .........................................97-98 Designation of Non-financial Items as Hedged Items ........................................ 99 Designation of Groups of Items as Hedged Items .................................... 100-101 Hedge Accounting ...................................................................................... 102-118 Fair Value Hedges................................................................................... 106-112 Cash Flow Hedges .................................................................................. 113-118 PRESENTATION .................................................................................... 119-129 Revaluation Reserves ........................................................................................ 120 Offsetting a Financial Asset and a Financial Liability ................................. 121-129 DISCLOSURES ...................................................................................... 130-150 Classes of Financial Instruments and Level of Disclosures................................ 130 Statement of Financial Position .............................................................. 131-137 Categories of Financial Assets and Financial Liabilities .................... 131-134 Derecognition .......................................................................................... 135 Collateral ................................................................................................ 136 Allowance Account for Credit Losses ....................................................... 137 Statement of Surplus Deficit .......................................................................... 138 Income, Expenses, Gains or Losses Accounts.......................................... 138 Other Disclosures ................................................................................... 139-147 Accounting Policies ................................................................................. 139 Fair Value ........................................................................................ 140-147 Risk Management Associated with Financial Instruments.......................... 148-150
95. TRANSITIONAL PROVISIONS ....................................................................... 151 EFFECTIVE DATE ........................................................................................ 152 APPENDIX APPLICATION GUIDELINES
96. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 06 Policy-Related Financial Instruments Statement of Financial Accounting Policy (PKAK) 06 consists of paragraphs 1-152. All of the paragraphs in this Statement are equally binding. The paragraphs that are printed in bold type and italics set out the main principles. PKAK 06 must be read in the context of regulation objectives and in conjunction with the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements. PKAK 01: Accounting Policies describes the basis for the selection and application of accounting policies if no specific PKAK is applicable. It is not mandatory for this Statement to be applied to elements that are not material. INTRODUCTION Objective 01. The purpose of this Statement is to establish principles for the recognition, classification, measurement, presentation and disclosure of financial assets, financial liabilities, and contracts to buy or sell nonfinancial items. Scope 02. This Statement shall be applied by Bank Indonesia to all types of financial instruments that are used for the purpose of policy implementation, except for Rupiah Currency under the control of Bank Indonesia which is in accordance with PKAK 05: Currency in Circulation. 03. This Statement does not apply to financial instruments that are not used for policy implementation (non-policy-related financial instruments), including equity instruments, special drawing rights, receivables or lease payables recognised by Bank Indonesia, derivatives that are embedded in leases, and the rights and obligations of Bank Indonesia as an employer based on its employee benefits programs. 04. The following loan commitments are within the scope of this Statement: (a) loan commitments that Bank Indonesia designates as financial liabilities at fair value through revaluation reserves. If Bank Indonesia has a past experience of selling the assets resulting from loan commitments shortly after origination, Bank Indonesia
97. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 shall apply this Statement to all its loan commitments in the same class. (b) loan commitments that can be settled net in cash or by delivering or issuing another financial instrument. These loan commitments are derivatives. A loan commitment is not regarded as settled net merely because the loan is paid out in instalments (for example, a mortgage construction loan that is paid out in instalments in line with the progress of construction). (c) commitments to provide loans at below-market interest rates. Paragraph 43 specifies the subsequent measurement of liabilities arising from these loan commitments. This Statement requires the disclosure of loan commitments even if they do not come within the scope of this paragraph. 05. This Statement shall be applied to those contracts to buy or sell non-financial items that can be settled net in cash or with another financial instrument, or by exchanging financial instruments, as if the contracts were financial instruments, with the exception of contracts that were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with the Bank Indonesia‟s expected purchase, sale or usage requirements. 06. There are various ways in which a contract to buy or sell a nonfinancial item may be settled net in cash or with another financial instrument, or by exchanging financial instruments. These include: (a) when the terms of the contract permit either party to settle it net in cash or another financial instrument or by exchanging financial instruments; (b) when the ability to settle net in cash or with another financial instrument or by exchanging financial instruments is not explicitly stated in the terms of the contract, but Bank Indonesia has a practice of settling similar contracts net in cash or another financial instrument or by exchanging financial instruments (whether with the counterparty, by entering into offsetting contracts or by selling the contract before its exercise or lapse); (c) when the non-financial item that is the subject of the contract is readily convertible to cash. A contract to which (b) applies is not entered into for the purpose of the receipt or delivery of the non-financial item in accordance with the Bank Indonesia‟s expected purchase, sale or usage requirements and, accordingly, is within the scope of this Statement. Other contracts to which paragraph 05 applies are evaluated to determine whether they were entered into and continue to be held for the purpose of the receipt or delivery of the nonfinancial item in accordance with the Bank Indonesia‟s expected purchase, 6.2 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
98. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 sale or usage requirements and, accordingly, whether they are within the scope of this Statement. 07. A written option to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging financial instruments, in accordance with paragraph 6(a) or (c) is within the scope of this Statement. Such option contracts cannot be entered into for the purpose of the receipt or delivery of a non-financial item in accordance with the Bank Indonesia‟s expected purchase, sale or usage requirements. Definitions 08. The following terms are used in this Statement: A policy-related financial asset, hereinafter referred to as financial assets in this Statement, is any asset that is used in the implementation of Bank Indonesia policy and which takes the following forms: (a) cash; (b) contractual right; (i) to receive cash or another financial asset from another entity; or (ii) to exchange a financial asset or financial liability with another entity subject to conditions that have the potential to provide benefit in the future. Non policy-related financial assets are governed by PKAK 07: NonUnique Transactions. Financial assets at fair value through revaluation reserves are a financial asset that satisfies one of the conditions set out below: (a) held for sale in the context of Bank Indonesia policy implementation. (b) contractual cash flow does not only consist of principal and interest payments. (c) at the time of initial recognition, it is determined by Bank Indonesia that it should be measured at fair value through revaluation reserves (in accordance with paragraph 44 or 49). It should be noted that the GAS on the Measurement of Fair Value, in accordance with PKAK 07: Non-Unique Transactions, specifies the requirements for measuring the fair value of financial assets (including those designated to be measured at fair value), or items whose fair value is disclosed. Transaction costs are incremental costs that are directly attributable to the acquisition, issuance or disposal of a financial asset or 6.3 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
99. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 financial liability (see paragraph PP21). An incremental cost is one that would not have been incurred if Bank Indonesia had not acquired, issued or disposed of financial instruments. A derivative is a financial instrument, or other contract within the scope of this Statement, with all three of the following characteristics: (a) its value changes in response to changes in specified variables (often referred to as underlying variables), including interest rate, financial instrument price, commodity price, foreign exchange rate, price index or interest rate index, credit rating or credit index, and other variables. For non-financial variables, the variable is not specific to a party to the contract; (b) it requires no initial net investment, or an initial net investment that is smaller than would be required for other similar contracts that would be expected to have a similar response to changes in market factors; and (c) it is settled at a future date. Hedge effectiveness is the degree to which changes in cash flows from a hedged item that are attributable to the hedged risk are offset by changes in cash flows from the hedging instrument (see PP131-PP142). Financial instruments held for sale are financial assets that are: (a) acquired or held primarily for the purpose of sale or repurchase in the near term; (b) at the time of initial recognition, part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term trading; or (c) a derivative. Financial instruments measured at amortised cost are all nonderivative financial assets or financial liabilities that meet the requirements set out in paragraph 39. Policy-related financial instruments are financial instruments that are used by Bank Indonesia management to achieve and maintain Rupiah value stability in accordance with the mandate provided by the provisions of the laws and regulations in effect. These are hereinafter referred to as financial instruments in this Statement. 6.4 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
100. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 A hedging instrument is: (a) a designated derivative for hedging purposes; or (b) a designated non-derivative financial asset or non-derivative financial liability for hedging purposes (for a hedge of the risk of changes in foreign currency exchange rates only), whose cash flows are expected to offset changes in the cash flows of a designated hedged item (paragraphs 88-93 and PP119-PP120 elaborate on the definition of hedging instrument). A hedged item is an asset, liability, firm commitment highly probable forecast transaction that (a) exposes Bank Indonesia to risk of changes in future cash flows, and (b) is designated as being hedged (paragraphs 94-101 and PP121 -PP127 provide further explanations on the definition of a hedged item). A puttable instrument is a financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset, or to automatically put back to the issuer on the occurrence of an uncertain event in the future or upon the death or retirement of the instrument holder. Firm commitment is a binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates. A financial guarantee contracts is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A policy-related financial liability, hereinafter referred to as a financial liability in this Statement, is any liability that arises during the implementation of Bank Indonesia policy and which takes the form of a contractual obligation: (a) to deliver cash or another financial asset to another entity; or (b) to exchange financial assets or financial liabilities with another entity which could potentially lead to the foregoing of resources in the future. Non-policy-related financial liabilities are governed by PKAK 07: NonUnique Transactions. Financial liabilities at fair value through revaluation reserves are financial liabilities that satisfy one of the following conditions: (a) held for sale in the context of policy implementation. 6.5 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
101. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 (b) upon initial recognition it is designated by Bank Indonesia to be measured at fair value through revaluation reserves (in accordance with paragraph 44 or 49). It should be noted that the GAS on Measurement of Fair Value, in accordance with PKAK 07: Non-Unique Transactions, sets out the requirements for measuring the fair value of financial liabilities (including those designated to be measured at fair value), or items whose fair value is disclosed. 38 39 40 41 42 43 09. In this Statement, the terms "contract" and "contractual" refer to an agreement between two or more parties that has clear economic consequences and which there is very little possibility of evasion by the parties involved, generally due to the fact that the agreement can be enforced by law. Contracts and financial instruments may take a variety of forms and need not be in written form. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame that are generally established by regulation or convention in the marketplace concerned. Derecognition is the removal of a previously recognised financial asset or financial liability from Bank Indonesia‟s statement of financial position. A forecast transaction is an uncommitted but anticipated future transaction. Revaluation reserves are the cumulative changes in the fair value of the assets and liabilities of Bank Indonesia, or the financial impact of Bank Indonesia unique transactions where such transactions have yet to achieve their ultimate objectives. Financial instrument revaluation reserves are the cumulative change in the fair value of the financial assets and liabilities of Bank Indonesia that have yet to achieve their ultimate objectives. Reclassification date is the first day of the first reporting period following the change in the business model that results in Bank Indonesia reclassifying financial assets. 6.6 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
102. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 RECOGNITION AND DERECOGNITION Initial Recognition 10. Bank Indonesia shall recognise a financial asset or a financial liability in its statement of financial position if, and only if, Bank Indonesia becomes a party to the contractual provisions of the instrument (see paragraphs AG22 and AG23). When Bank Indonesia first recognises a financial asset, it shall classify such asset in accordance with paragraphs 38-42 and measure it based on paragraphs 54-56. When Bank Indonesia first recognises a financial liability, it shall classify it in accordance with paragraphs 43 and 44 and measure it based on paragraphs 54-55. Regular Way Purchase or Sale of a Financial Asset 11. The purchase or sale of a regular financial asset shall be recognised and derecognised using the trade date accounting or settlement date accounting (see paragraph AG24-AG27). Derecognition of a Financial Asset 12. Before evaluating whether and to what extent, derecognition is in accordance with paragraphs 13-19, Bank Indonesia determines whether those paragraphs have been applied to a part of the financial asset (or a part of a group of similar financial assets) or all of the financial asset (or group of similar financial assets) in the following way: (a) paragraphs 13-19 applied to a part of the financial asset (or a part of a group of similar financial assets) if, and only if, the part that is derecognised is deemed to meet one of the following three criteria: (i) the part comprises only a fully proportionate (pro rata) share of the cash flows from a financial asset (or a group of similar financial assets). For example, when Bank Indonesia enters into an interest rate strip whereby the counterparty obtains the right to the interest cash flows, but not the principal cash flows from a debt instrument, paragraphs 13-19 are applied to the interest cash flows. (ii) the part comprises only of a pro rata share of the cash flows from the financial asset (or a group of similar financial assets). For example, when the Bank enters into an agreement whereby its counterpart acquires the right to 90% of the overall cash flows from the debt instrument, 6.7 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
103. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 then paragraphs 13-19 are applied to 90% of the cash flows. If there is more than one counterparty, each counterparty is not required to have a pro rata share of the cash flows provided that Bank Indonesia has a fully pro rata share. (iii) the part comprises only of a fully pro rata share of specifically identified cash flows from a financial asset (or a group of similar financial assets). For example, when the Bank enters into an agreement in which the counterparty obtains the right to a 90% of interest cash flows from a financial asset, paragraphs 13-19 are applied to 90% of those interest cash flows. If there is more than one counterparty, each counterparty is not required to receive a pro rata share of the specifically identified cash flows provided that Bank Indonesia receives its full pro rata share. (b) in all other cases, paragraphs 13-19 apply to the financial asset in its entirety (or a group of similar financial assets overall). For example, if Bank Indonesia transfers (i) the rights to the first or last 90% of the cash collections from a financial asset (or a group of financial assets), or (ii) the rights to 90% of the cash flows from a group of receivables, but provides a guarantee to compensate the buyer for any credit losses up to 8% of the principal amount of receivables, then paragraphs 13-19 are applied to the financial asset (or a group of similar financial assets) in its entirety. In paragraphs 13-22, the term "financial asset" refers to either a part of a financial asset (or part of a group of similar financial assets) as identified in point (a) above, or, otherwise, a financial asset (or group of similar financial assets) in its entirety. 13. Bank Indonesia shall derecognise a financial asset, when and only when: (a) the contractual rights to the cash flows from the financial asset expire; or (b) Bank Indonesia transfers the financial asset, as described in paragraphs 14 and 15, and the transfer qualifies for derecognition in accordance with paragraph 16. (See paragraph 11 for regular way sales of financial assets). 14. Bank Indonesia transfers a financial asset if, and only if, it either: (a) transfers the contractual rights to receive cash flows of the financial asset; or 6.8 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
104. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 (b) retains the contractual rights to receive cash flows from the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients in an agreement that meets the conditions in paragraph 15. 15. If Bank Indonesia retains the contractual right to receive the cash flow from a financial asset (the original asset), but assumes a contractual obligation to pay the received cash flows to one or more entities (the eventual recipients), then Bank Indonesia treats the transaction as a transfer of a financial asset if, and only if, all of the following requirements are met: (a) Bank Indonesia is not obliged to pay amount to the eventual recipients unless it collects equivalent amounts from the original asset. Short-term advances by Bank Indonesia with the right of full recovery of the loan amount plus accrued interest calculated based on market rates do not violate this requirement; (b) Bank Indonesia is not allowed under the terms of the transfer contract to sell or collateralize the original asset other than as security to the eventual recipient for the obligation to pay them cash flows; (c) Bank Indonesia is obliged to deliver any cash flows it collects on behalf of the eventual recipient without significant delay. In addition, Bank Indonesia is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents, during the short-term settlement period between the billing date and the date of payment to the eventual recipient, and interest income earned from such investments must be delivered to the eventual recipient. 16. When Bank Indonesia transfers a financial asset (see paragraph 14), Bank Indonesia shall evaluate the extent to which Bank Indonesia retains the risks and rewards of ownership of the financial asset. In this regard: (a) if Bank Indonesia transfers substantially all of the risks and rewards of ownership of the financial assets, Bank Indonesia shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer; (b) if Bank Indonesia retains substantially all the risks and rewards of ownership of the financial asset, Bank Indonesia shall continue to recognise the financial asset; (c) if Bank Indonesia neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, Bank 6.9 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
105. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Indonesia shall determine whether it has retained control of the financial asset. In such circumstances: (i) if Bank Indonesia no longer has not retained control, Bank Indonesia shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer. (ii) if Bank Indonesia has retained control, Bank Indonesia shall continue to recognise the financial asset to the extent of its continuing involvement in the financial asset (see paragraph 26). 17. A transfer of risks and rewards (see paragraph 16) is evaluated by comparing Bank Indonesia‟s exposure before and after the transfer, with the variability in the amounts and timing of the net cash flows of the transferred asset. Bank Indonesia has retained substantially all the risks and rewards of ownership of a financial asset if Bank Indonesia‟s exposure to the variability in the present value of future net cash flows from the financial asset does not change significantly as a result of the transfer (for example, because under an agreement, Bank Indonesia has sold the financial asset and now has to repurchase it at a pre-determined price or at the sale price plus a profit). Bank Indonesia has transferred substantially all the risks and rewards of ownership of a financial asset if Bank Indonesia‟s exposure to such variability is no longer significant in relation to total variability in the present value of future net cash flows associated with the financial asset (for example, Bank Indonesia has sold a financial asset subject only to an option to buy it back at its fair value at the time of repurchase, or Bank Indonesia has transferred a fully proportionate share of the cash flows from a larger financial asset in an arrangement, such as in the case of a sub-participation loan, which meets the requirements of paragraph 15). 18. Often it will be obvious whether Bank Indonesia has transferred or retains substantially all risks and rewards of ownership and there will be no need to perform any computation. In other cases, it will be necessary to compute and compare Bank Indonesia‟s exposure to the variability in the present value of the future net cash flows before and after the transfer. The computation and comparison are made using as the discount rate an appropriate current market interest rate. All reasonably possible variability in net cash flows is considered, with greater weight being given to those outcomes that are more likely to occur. 19. The determination of whether Bank Indonesia has retained control (see paragraph 16(c)) over the transferred asset depends on the transferee's ability to sell the asset. If the transferee has the practical ability to sell the asset as a whole to an unrelated third party, and is able to 6.10 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
106. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 exercise that ability independently without the need to impose additional restrictions on the transfer, then Bank Indonesia has not retained control. In all other cases, Bank Indonesia has retained control over the transferred asset. Transfer that Qualify for Derecognition 20. If Bank Indonesia transfers a financial asset in a transfer that qualifies for derecognition in its entirety and retains the right to service the financial asset for a fee, it shall recognise either a servicing asset or a servicing liability for that servicing contract. If the fee to be received is not expected to compensate the entity adequately for performing the servicing, a servicing liability for the servicing obligation shall be recognised at its fair value. If the fee to be received is expected to be more than adequate compensation for the servicing, a servicing asset shall be recognised for the servicing right at an amount determined on the basis of an allocation of the carrying amount of the larger financial asset in accordance with paragraph 23. 21. If, as a result of a transfer, a financial asset is derecognised in its entirety, but the transfer results in Bank Indonesia obtaining a new financial asset or assuming a new financial liability, or a servicing liability, Bank Indonesia shall recognise the new financial asset or financial liability, or servicing liability at fair value. 22. At the time of derecognition of a financial asset in its entirety, the difference between: (a) the carrying amount; and (b) the sum of (i) payments received (including every new asset obtained less new liabilities incurred) and (ii) cumulative gains or losses that are recognised in the financial instrument revaluation reserves (see paragraph 69); shall be recognised in surplus deficit. 23. If the transferred asset is part of a larger financial asset (e.g., when Bank Indonesia transfers the interest cash flows that are part of a debt instrument, see paragraph 12(a)) and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset shall be allocated between the part that continues to be recognised and the part that is derecognised, on the basis of the relative fair values of those parts on the date of the transfer. For this purpose, a retained servicing asset shall be treated as a part that continues to be recognised. The difference between: 6.11 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
107. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 (a) (b) the carrying amount allocated to the part derecognised; and the sum of (i) payments received (including every new asset obtained less new liability incurred) and (ii) cumulative gains or losses that are recognised in the financial instrument revaluation reserves (see paragraph 69); is recognised in surplus deficit. Cumulative gains or losses that were previously recognised in the financial instrument revaluation reserves are allocated to the part that continues to be recognised and the part that is derecognised, on the basis of the relative fair values of each part. 24. When Bank Indonesia allocates the previous carrying amount of a larger financial asset between a part that continues to be recognised and the part that is derecognised, the fair value of the part that continues to be recognised needs to be measured. When Bank Indonesia has a history of selling parts similar to the part that continues to be recognised or other market transactions exist for such parts, recent price of actual transactions provide the best estimate of its fair value. When there are no price quotes or recent market transactions to support the fair value of the part that continues to be recognised, the best estimate of the fair value is the difference between the fair value of the larger financial asset as a whole and the amount received from the transferee for the part that is derecognised. Transfer that do not Qualify for Derecognition 25. If a transfer does not result in derecognition because Bank Indonesia has retained substantially all of the risks and rewards of ownership of the transferred asset, Bank Indonesia shall continue to recognise the transferred asset in its entirety and shall recognise a financial liability for the amount received. In subsequent periods, Bank Indonesia shall recognise any income on the transferred asset and any expense incurred on the financial liability. Continuing Involvement in Transferred Assets 26. If Bank Indonesia neither transfers nor retains substantially all the risks and rewards of ownership of a transferred asset, and retains control of the transferred asset, then Bank Indonesia continues to recognise the transferred asset to the extent of Bank Indonesia‟s continuing involvement. The extent of Bank Indonesia‟s continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the transferred asset. For example: 6.12 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
108. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (a) (b) (c) when Bank Indonesia‟s continuing involvement takes the form of guaranteeing the transferred asset, the extent of bank Indonesia‟s continuing involvement is the lower of the (i) the amount of the transferred asset, and (ii) the maximum amount of payments received that Bank Indonesia could be required to pay (the guarantee amount). when Bank Indonesia‟s continuing involvement takes the form of a written and / or purchased option (or both) on the transferred asset, the extent of Bank Indonesia‟s continuing involvement is the amount of the transferred asset that Bank Indonesia may repurchase. However, in case of a written put option on an asset that is measured at fair value, the extent of Bank Indonesia‟s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price (see paragraph PP39). when Bank Indonesia‟s continuing involvement takes the form of a cash-settled option or similar provisions on the transferred asset, the extent of Bank Indonesia‟s continuing involvement is measured in the same way as that which results from non-cash settled options, as set out in (b) above. 27. When Bank Indonesia continues to recognise an asset to the extent of its continuing involvement with the asset, Bank Indonesia also recognises an associated liability. Despite the other measurement requirements in this Statement, the transferred asset and its associated liability are measured on a basis that reflects the rights and obligations that Bank Indonesia has retained. The associated liability is measured in such a way that the net carrying amount of the transferred asset and associated liability is treated as follows: (a) the amortised cost of the rights and obligations retained by Bank Indonesia, if the transferred asset is measured at amortised cost; or (b) equal to the fair value of the rights and obligations retained by Bank Indonesia when measured on a stand-alone basis, if the transferred asset is measured at fair value. 28. Bank Indonesia shall continue to recognise any income arising on the transferred assets to the extent of its continuing involvement, and recognise any expense on the associated liability. 29. For the purpose of subsequent measurement, recognised changes in the fair value of the transferred asset and associated liability are accounted for consistently with paragraph 69, and shall not be offset. 6.13 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
109. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 30. If Bank Indonesia‟s continuing involvement is only a part of a financial asset (for example, when Bank Indonesia retains an option to repurchase part of the transferred asset, or retains a residual interest that does not result in the retention of substantially all of the risks and rewards of ownership of the financial assets, and Bank Indonesia retains control), then Bank Indonesia allocates the previous carrying amount of the financial asset between the part the Bank continues to recognise under continuing involvement and the part that the Bank no longer recognise based on the relative fair values of the two parts as per the date of transfer. For this purpose, the provisions of paragraph 24 are applied. The difference between: (a) the carrying amount allocated to the part that is no longer recognised; and (b) the sum of (i) payments received for the part that is no longer recognised; and (ii) any cumulative gains or losses allocated to the part that is no longer recognised that was previously recognised in the financial instrument revaluation reserves(see paragraph 69); shall be recognised in surplus deficit. A cumulative gain or loss that had been recognised in the financial instrument revaluation reserves is allocated between the part that continues to be recognised and the part that is no longer recognised, based on the relative fair values of the those parts. 31. If the transferred asset is measured at amortised cost, the option in this Statement to designate a financial liability as at fair value through revaluation reserves is not applicable to the associated liability. All Transfers 32. If a transferred asset continues to be recognised, the asset and associated liabilities shall not be offset. Similarly, Bank Indonesia shall not offset any income arising from the transferred asset with any expense incurred on the associated liability (see paragraph 121). 33. If a transferor provides non-cash collateral (such as debt instruments) to the transferee, the accounting for the collateral by the transferor and the transferee depends on whether the transferee has the right to sell or repledge the collateral and on whether the transferor has defaulted. The transferor and transferee shall account for the collateral as follows: (a) If the transferee has the right by contract or custom to sell or repledge the collateral, then the transferor shall reclassify that 6.14 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
110. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 (b) (c) (d) asset in its statement of financial position (e.g. as a loaned asset or repurchase receivable) separately from other assets. If the transferee sells the collateral pledged to it, it shall recognise the proceeds from the sale and a liability measured at fair value for its obligation to return the collateral. If the transferor defaults under the terms of the contract and is no longer entitled to redeem the collateral, it shall derecognise the collateral, and the transferee shall recognise the collateral as its asset initially measured at fair value or, if it has already sold the collateral, then the transferee must derecognise its obligation to return the collateral. Except as provided in (c), the transferor shall continue to carry the collateral as its asset, and the transferee shall not recognise the collateral as an asset. Derecognition of a Financial Liability 34. Bank Indonesia shall remove a financial liability (or part of a financial liability) from the statement of financial position if, and only if, it is extinguished, i.e., when the obligation specified in the contract is discharged or cancelled or expires. 35. An exchange between an existing borrower and lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability or a part of it (whether or not attributable to the financial difficulty of the debtor) shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. 36. At the time of derecognition of the financial liability, the difference between: (a) the carrying amount of a financial liability (or part of the financial liability) extinguished or transferred to another party, and (b) the sum of (i) the amount paid (including non-cash assets transferred or liabilities assumed) and (ii) cumulative gains or losses that have been recognised in the financial instrument revaluation reserves for financial liabilities measured at fair value through the revaluation reserves (see paragraph 69); are recognised in surplus deficit. 6.15 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
111. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 37. If Bank Indonesia repurchases a part of a financial liability, it shall allocate the previous carrying amount of the financial liability between the part that continues to be recognised and the part that is derecognised based on the relative fair values of the those parts on the date of repurchase. The difference between (a) the carrying amount allocated to the part derecognised and (b) the sum of (i) the amount paid, including non-cash assets that are transferred or liabilities assumed, and (ii) cumulative gains or losses that had been recognised in the financial instrument revaluation reserves for financial liabilities measured at fair value through the revaluation reserves, for the part that has been derecognised shall be recognised in surplus deficit. CLASSIFICATION Classification of Financial Assets 38. Unless paragraph 42 applies, Bank Indonesia shall classify financial assets as subsequently measured at either amortised cost or fair value through revaluation reserves on the basis of both: (a) business model for the financial asset; and (b) the contractual cash flow characteristics of the financial asset. 39. A financial asset shall be measured at amortised cost if both of the following conditions are met: (a) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Paragraphs PP51-PP76 provide guidance on how to apply these conditions. 40. For the purposes of applying paragraph 39 (b), interest is consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time. 41. A financial asset shall be measured at fair value through revaluation reserves unless it is measured at amortised cost in accordance with paragraph 39. 6.16 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
112. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Option to Designate a Financial Revaluation Reserves Asset at Fair Value through 42. Despite paragraphs 39-41, Bank Indonesia may, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an „accounting mismatch‟) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases (see paragraph PP79- PP82). Classification of Financial Liabilities 43. Bank Indonesia shall classify all financial liabilities as subsequently measured at amortised cost using the effective interest method, except for: (a) financial liabilities at fair value through revaluation reserves. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value; (b) financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies. Paragraphs 25 and 27 apply to the measurement of such financial liabilities; (c) financial guarantee contracts, as defined in paragraph 08. After initial recognition, an issuer of such a contract shall (unless paragraph 43(a) or (b) applies) subsequently measure it at the higher of: (i) the amount determined in accordance with PKAK 07: Nonunique Transactions, and (ii) the amount initially recognised (see paragraph 54) less, when appropriate, cumulative amortization recognised in accordance with PKAK 07: Non-unique Transactions; (d) commitments to provide loans at below market interest rates. After initial recognition, an issuer of such a commitment shall (unless paragraph 43(a) applies) subsequently measure it at the higher of: (i) the amount determined in accordance with PKAK 07: Nonunique Transactions, and (ii) the amount initially recognised (see paragraph 54) less, when appropriate, cumulative amortization recognised in accordance with PKAK 07: Non-unique Transactions. 6.17 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
113. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Option to Designate a Financial Liability at Fair Value through Revaluation Reserves 44. At initial recognition, Bank Indonesia may irrevocably designate a financial liability as measured at fair value through revaluation reserves, when permitted by paragraph 49, or when doing so results in more relevant information, because either: (a) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as „an accounting mismatch‟) that would otherwise arise from measuring assets or liabilities, or recognizing gains or losses on them on a different basis; or (b) it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as „an accounting mismatch‟) that would otherwise arise from measuring assets or liabilities, or recognizing gains or losses on them on a different basis; or Embedded Derivatives 45. An embedded derivative is a component of a hybrid contract that also includes a non-derivative host—with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flow that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, price index or interest rate index, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. A derivative that is attached to a financial instrument but is contractually transferable independently of that instrument, or has a different counterparty, is not an embedded derivative, but a separate financial instrument. Hybrid Contracts with Financial Asset Hosts 46. If the hybrid contract contains a host that is an asset within the scope of this Statement, Bank Indonesia shall apply the requirements in paragraphs 38-42 to the entire hybrid contract. Other Hybrid Contracts 47. If the hybrid contract contains a host that is not an asset within the scope of this Statement, an embedded derivative shall be 6.18 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
114. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 separated from the host and measured as a derivative in accordance with this Statement, if and only if: (a) the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract (see paragraph PP90 and PP92); (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and (c) the hybrid contract is not measured at fair value, with changes in fair value recognised in the financial instrument revaluation reserves (i.e., a derivative that is embedded in a financial liability at fair value through revaluation reserves is not separated). 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 49. Despite paragraphs 47 and 48, if a contract contains one or more embedded derivatives and the host contract is not an asset within the scope of this Statement, Bank Indonesia may designate the entire hybrid contract as at fair value through revaluation reserves unless: (a) the embedded derivative(s) do(es) not significantly modify the cash flows that otherwise would be required by the contract; or (b) it is clear, with little or no analysis when a similar hybrid instrument is first considered that separation of the embedded derivative(s) is prohibited, such as a prepayment option embedded in a loan that permits the holder to prepay the loan for approximately its amortised cost. 48. If an embedded derivative is separated, the host contract shall be accounted for in accordance with the appropriate PKAK. This Statement does not address whether an embedded derivative shall be presented separately in the statement of financial position. 50. If Bank Indonesia is required by this Statement to separate an embedded derivative from its host contract, but is unable to measure the embedded derivative separately, either at acquisition or at the end of a subsequent financial reporting period, Bank Indonesia shall designate the entire hybrid contract as at fair value through revaluation reserves. 51. If Bank Indonesia is unable to measure reliably the fair value of an embedded derivative on the basis of its terms and conditions, the fair value of the embedded derivative is the difference between the fair value of the hybrid contract and the fair value of the host. If the Bank Indonesia is unable to measure the fair value of the embedded derivative using this 6.19 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
115. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 method, paragraph 50 applies and the hybrid contract is designated as at fair value through revaluation reserves. Reclassification 52. When, and only when, Bank Indonesia changes its business model for managing financial assets, it shall reclassify all financial assets that are affected in accordance with paragraphs 38-41. 53. Bank Indonesia shall not reclassify any financial liabilities.. MEASUREMENT Initial Measurement of Financial Assets and Liabilities 54. Bank Indonesia measures a financial asset or financial liability at its fair value at the time of initial recognition. In the case of a financial asset or financial liability is not classified for measurement at fair value through revaluation reserves, fair value includes transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability. 55. However, if the fair value of the financial asset or financial liability at initial recognition differs from the transaction price, Bank Indonesia shall apply paragraph PP100. 56. If Bank Indonesia uses settlement date accounting for an asset that is subsequently measured at amortised cost, such asset is recognised initially at its fair value on the trade date (see paragraphs PP24-PP27). Subsequent Measurement of Financial Assets 57. After initial recognition, Bank Indonesia shall measure a financial asset in accordance with paragraphs 38-42 at fair value through revaluation reserves or amortised cost (see paragraph 62 and PP104-PP107). 58. Bank Indonesia shall apply the impairment requirements in paragraphs 77-83 and PP110-PA117 in respect of all of its financial assets. 59. Bank Indonesia shall apply the hedge accounting requirements in paragraphs 106-118 to a financial asset that is designated as hedged item (see paragraphs 94-101 and PP121-PP127). 6.20 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
116. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Subsequent Measurement of Financial Liabilities 60. After initial recognition, Bank Indonesia shall measure a financial liability in accordance with paragraphs 43-44 (see paragraph 62 and PP104-PP107) 61. Bank Indonesia shall apply the hedge accounting requirements in paragraphs 106-118 to a financial liability that is designated as hedged items (see paragraphs 94-101 and PP121-PP127). Amortised Cost Measurement 62. The amortised cost of a financial asset or financial liability is the amount of the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method calculated based of any difference between the initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. 63. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument, or when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, Bank Indonesia shall estimate cash flows considering all of contractual terms of the financial instrument (or example, prepayment, call and similar options), but shall not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate (see PKAK 07: Non-unique Transactions), transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, in those rare cases, if it is not possible to estimate reliably the cash flows or the expected life of the financial instrument (or group of financial instruments), then Bank Indonesia shall use the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments). 6.21 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
117. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Fair Value Measurement 64. In determining the fair value of a financial asset or financial liability for the purposes of this Statement, Bank Indonesia shall apply PKAK 07: Non-unique Transactions. Reclassification of Financial Assets 65. If Bank Indonesia reclassifies a financial asset in accordance with paragraph 52, it shall apply the reclassification prospectively from the date of reclassification. Bank Indonesia shall not restate any previously recognised gains, losses or interest. 66. If, in accordance with paragraph 52, Bank Indonesia reclassifies a financial asset so that it is measured at fair value through the revaluation reserves, its fair value is measured at the reclassification date. Any gain or loss arising from a difference between the previous carrying amount and fair value is recognised in financial instrument revaluation reserves. 67. If, in accordance with paragraph 52, Bank Indonesia reclassifies a financial asset so that it is measured at amortised cost, its fair value at the reclassification date becomes its new carrying amount. 68. If Bank Indonesia reclassifies a financial asset in accordance with paragraph 67, then any gain or loss previously recognised in the financial instrument revaluation reserves is recognised in surplus deficit at the time of reclassification. Gains and Losses 69. Gains or losses arising from changes in the fair value of financial assets or financial liabilities are recognised in the financial instrument revaluation reserves. 70. A gain or loss that is recognised under paragraph 69 in respect of a financial asset measured at fair value through revaluation reserves, where such financial asset is not part of a hedging relationship (see paragraphs 106-118), shall be recognised in the surplus deficit when the financial asset achieves its ultimate objective impaired. A gain or loss on financial liability that is measured at fair value through revaluation reserves, and is not part of a hedging relationship (see paragraphs 106-118), shall be recognised 6.22 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
118. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 in surplus deficit when the financial liability achieves its ultimate objective. 71. A gain or loss on a financial asset that is measured at amortised cost and is not part of a hedging relationship (see paragraphs 106-118), shall be recognised in surplus deficit when the financial asset achieves its ultimate goal, impaired and through amortization process. A gain or loss on a financial liability that is measured at amortised cost and is not part of a hedging relationship (see paragraphs 106-118), shall be recognised in surplus deficit when the financial liability achieves its ultimate objective and through the amortisation process. 72. The ultimate objective of a transaction related to a financial asset is achieved when the financial asset is derecognised or reclassified. The ultimate objective of a transaction related to a financial liability is achieved when the financial liability is derecognised. 73. A gain or loss on financial assets or financial liabilities that are hedged (see paragraphs 94-101 and PP121-PP127) shall be recognised in accordance with paragraphs 106-118. 74. If Bank Indonesia recognises a financial asset using settlement date accounting (see paragraph 11 and paragraph PP24 and PP27), then any change in the fair value of the asset to be received during the period between the trade date and the settlement date is not recognised for assets measured at amortised cost (other than impairment losses). However, for assets measured at fair value, the change in fair value is recognised in the financial instrument revaluation reserves, in accordance with paragraph 69. Liabilities Designated as at Fair Value through Revaluation Reserves 75. Bank Indonesia shall recognise a gain or loss arising from changes in the fair value of financial liabilities designated as measured at fair value through the revaluation reserves in the financial instrument revaluation reserves. 76. Bank Indonesia shall recognise a gain or loss arising from changes in the fair value of loan commitments and financial guarantee contracts designated as at fair value through revaluation reserves in the financial instrument revaluation reserves. 6.23 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
119. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Impairment of Financial Assets 77. At the end of each reporting period, Bank Indonesia shall assess whether there is any objective evidence that a financial asset or group of financial assets is impaired. If any such evidence exists, Bank Indonesia shall apply paragraph 81 (for financial assets measured at amortised cost) or paragraph 84 (for financial assets mat fair value through the revaluation reserves) to determine the amount of any impairment loss. 78. A financial asset or group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows from the financial asset or group of financial assets that can be reliably estimated. It may not be possible to identify a single, discrete event that caused the impairment. Rather the combined effect of several events may have caused the impairment. Losses expected as a result of future events, no matter how likely, are not recognised. Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder of the asset about the following loss events: (a) significant financial difficulties of the issuer or obligor; (b) a breach of contract, such as a default or delinquency in interest or principal payments; (c) the lender, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; (d) it becoming probable that the borrower will enter bankruptcy or other financial reorganization; (e) the disappearance of an active market for the financial asset as a result of financial difficulties; or (f) observable data indicating a measurable decrease in the estimated future cash flows of a group of financial assets since the initial recognition of those assets, even if the decrease cannot as yet be identified with the individual financial assets in the group, including: (i) adverse changes in the payment status of borrowers in the group (e.g., an increased number of delayed payments or an increased number of credit card borrowers who have reached their credit limit and are paying the minimum monthly amount); or (ii) national or local economic conditions that correlate with defaults on the assets in the group (for example, increasing unemployment rate in the geographical area of the borrowers, a 6.24 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
120. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 decrease in property prices for mortgages in the relevant area, a decline in oil prices for loan assets given to oil producers, or adverse changes in industry conditions that affect borrowers in the group). 79. The disappearance of an active market because an issuer‟s financial instruments are no longer publicly traded is evidence of impairment. A downgrade of an issuer's credit rating is not, of itself, evidence of impairment, although it may be evidence of impairment when considered with other available information. A decline in the fair value of financial assets below its cost or amortised cost is not necessarily evidence of impairment (for example, a decline in the fair value of investments in debt instruments that results from an increase in the risk-free interest rate). 80. In some cases, the observable data required to estimate the amount of an impairment loss on a financial asset may be limited or no longer fully relevant to current circumstances. For example, this may be the case when a borrower is in financial difficulties and there is little available historical information relating to similar borrowers. Likewise, Bank Indonesia uses its experienced judgment in estimating the amount of impairment losses. Similarly, Bank Indonesia also uses its experienced judgment to adjust the observable data for a group of financial assets to reflect current circumstances (see paragraph PP115). The use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability. Financial Assets Measured at Amortised Cost 81. If there is objective evidence that an impairment loss has been incurred on a financial asset measured at amortised cost, the amount of the loss is measured as the difference between the asset‟s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset‟s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall directly be reduced by the amount of the impairment loss. The amount of the loss is recognised in surplus deficit. 82. Bank Indonesia first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant (see paragraph 78). If Bank Indonesia determines that no objective evidence of impairment exists for financial assets that are assessed individually, whether significant or not, it includes the asset in a 6.25 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
121. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment, and for which an impairment loss is or continues to be recognised, are not included in a collective assessment of impairment. 83. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the impairment loss that was previously recognised shall be reversed, either directly or by adjusting an allowance account. The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal shall be recognised in surplus deficit. Financial Assets at Fair Value through Revaluation Reserves 84. If a decline in the fair value of a financial asset at fair value through the revaluation reserves has been recognised in the financial instrument revaluation reserves and there is objective evidence that the asset is impaired (see paragraph 78), the cumulative loss previously recognised in the financial instrument revaluation reserves is recognised as surplus deficit even though the financial asset has not been derecognised. 85. The amount of cumulative loss recognised in surplus deficit in accordance with paragraph 84 represents the difference between the acquisition cost (net of any principal repayments and amortization) and current fair value, less any impairment loss on the financial asset that was previously recognised in surplus deficit. 86. If, in a subsequent period, the fair value of a financial asset in the form of a debt instrument that is classified as measured at fair value through revaluation reserves increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in surplus deficit, the impairment loss is reversed through surplus deficit. 6.26 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
122. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 HEDGING 87. If there is a designated hedging relationship between a hedging instrument and a hedged item, as described in paragraphs 102-105 and PP128-PP130, accounting for the gain or loss on the hedging instrument and the hedged item shall follow paragraphs 106 118. Hedging Instruments Qualifying Instruments 88. This statement does not restrict the circumstances in which a derivative may be designated as a hedging instrument, provided the conditions in paragraph 105 are met, except for some written options (see paragraph PP119). However, a non-derivative financial asset or nonderivative financial liability may be designated as a hedging instrument only for a hedge of a foreign currency risk. 89. This statement does not restrict the circumstances in which a derivative may be designated as a hedging instrument, provided the conditions in paragraph 105 are met, except for some written options (see paragraph PP119). However, a non-derivative financial asset or nonderivative financial liability may be designated as a hedging instrument only for a hedge of a foreign currency risk. Designation of Hedging Instruments 90. There is normally a single fair value measure for a hedging instrument in its entirety, and the factors that cause changes in fair value are co-dependent. Thus, a hedging relationship is designated by Bank Indonesia for a hedging instrument in its entirety. The only exceptions permitted are: (a) separating the intrinsic value and time value of an option contract and designating as the hedging instrument only the change in intrinsic value of an option and excluding change in its time value; and (b) separating the interest element and the spot price of a forward contract. These exceptions are permitted because the intrinsic value of the option and premium on the forward can generally be measured separately. A dynamic hedging strategy that assesses both the intrinsic value and time value of an option contract can qualify for hedge accounting. 6.27 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
123. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 91. A proportion of the entire hedging instrument, such as 50% of the notional amount, may be designated as the hedging instrument in a hedging relationship. However, a hedging relationship may not be designated for only a portion of the time period during which a hedging instrument remains outstanding. 92. A single hedging instrument may be designated as a hedge of more than one type of risk provided that (a) the risks hedged can be clearly identified; (b) the effectiveness of the hedge can be demonstrated; and (c) it is possible to ensure that there is specific designation of the hedging instrument and different risk positions. 93. Two or more derivatives, or proportions of them (or in the case of a hedge of currency risk, two or more non-derivatives or proportions of them, or a combination of derivatives and non-derivatives, or proportions of them), may be viewed in combination and jointly designated as the hedge instrument, including when the risk(s) arising some derivatives offset(s) those arising from others. However, an interest rate collar or other derivative instrument that combines a written option and a purchased option does not qualify as a hedging instrument if it is in effect a net written option (for which a net premium is received). Similarly, two or more instruments (or proportions of them) may be designated as the hedging instrument only if none of them is a written option or a net written option. Hedged Items Qualifying items 94. A hedged item can be a recognised asset or liability, an unrecognised firm commitment or a highly probable forecast transaction. The hedged item can be (a) a single asset, liability, firm commitment, highly probable forecast transaction, or (b) a group of assets, liabilities, firm commitment or highly probable forecast transaction with similar credit risk characteristics, or (c) in a portfolio hedge of interest rate risk, a portion of the portfolio of financial assets or financial liabilities that share the risk being hedged. 95. Financial assets measured at amortised cost can be hedged items of interest rate risk, prepayment risk, risk stemming from changes in exchange rates, or credit risk. 96. For hedge accounting purposes, only assets, liabilities, firm commitments or highly probable forecast transactions involving external parties to Bank Indonesia can be designated as hedged items. 6.28 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
124. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Designation of Financial Items as Hedged Items 97. If the hedged item is a financial asset or financial liability, it may be a hedged item with respect to the risks associated with only a portion of its cash flows or fair value (such as one or more selected contractual cash flows or portions of them or a percentage of the fair value), provided that the effectiveness of the hedge can be measured. For example, an identifiable and separately measurable portion of the interest rate exposure on an interestbearing asset or interest-bearing liability may be designated as the hedged risk (such as a risk-free interest rate or benchmark interest rate component of the total interest rate exposure of a hedged financial instrument). 98. In a fair value hedge of the interest rate exposure of a portfolio of financial assets or financial liabilities (and only in such a hedge), the hedged portion may be identified in terms of an amount of a currency (such as an amount of dollars or euros) rather than as individual assets (or liabilities). Although the portfolio may, for risk management purposes, include assets and liabilities, the amount designated is an amount of assets or an amount of liabilities. Designation of a net amount including assets and liabilities is not permitted. Bank Indonesia may hedge a portion of the interest rate risk associated with this designated amount. For example, in the case of a hedge of a portfolio containing prepayable assets, Bank Indonesia may hedge the change in fair value that is attributable to a change in the hedged interest rate based on expected, rather than contractual, repricing dates. When the hedged part is based on estimated repricing dates, the effect of changes in the hedged interest rate on the estimated repricing dates shall be included in determining the change in the fair value of the hedged item. Consequently, if a portfolio containing prepayable items is hedged with a non-prepayable derivative, ineffectiveness arises if the dates on which items in the hedged portfolio are expected to prepay are revised, or actual prepayment dates differ from those expected. Designation of Non-financial Items as Hedged Items 99. If the hedged item is a non-financial asset or non-financial liability, it shall be designated as a hedged item (a) for foreign currency risks, or (b) in its entirety for all risks, because of the difficulty of isolating and precisely measuring the appropriate portions in the cash flows or fair values changes attributable to specific risks other than foreign currency risk. 6.29 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
125. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Designation of Groups of Items as Hedged Items 100. Similar assets or similar liabilities shall be aggregated and hedged as a group only if the individual assets or individual liabilities in the group share a risk exposure that is designated as a hedged risk. Furthermore, the change in fair value attributable to the hedged risk for each individual item in the group of items shall be expected to be approximately proportional to the overall change in fair value attributable to the hedged risk of the group of items. 101. Because Bank Indonesia assesses hedge effectiveness by comparing the change in fair value or changes in cash flows on the hedging instrument (or group of similar hedging instruments) with the hedged item (or group of similar hedged items), the comparison of a hedging instrument with the overall net position (such as the net amount of all fixed-rate assets and fixed-rate liabilities that have similar maturities), rather than with a specific hedged item, does not qualify for hedge accounting. Hedge Accounting 102. Hedge accounting recognises the offsetting effect on surplus deficit of changes in the fair value of the hedging instrument and the hedged item. (a) (b) 103. A hedge relationship consists of two types: fair value hedge: a hedge of the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of the asset, liability, or firm commitment, which may be attributed to a particular risk and can affect surplus deficit. cash flow hedge: a hedge of the exposure to variability of cash flows that (i) is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or that is attributable to a particular risk associated with a highly probable forecast transactions, and (ii) could affect the surplus deficit. 104. A hedge of the foreign currency risk of a firm commitment may be accounted for as a cash flow hedge. 105. A hedging relationship qualifies for hedge accounting in accordance with paragraphs 106-118 if, and only if, all the following conditions are met: 6.30 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
126. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 (a) (b) (c) (d) (e) at the inception of the hedge there is formal designation and documentation of the hedging relationship and on Bank Indonesia‟s risk management objective and strategy for undertaking the hedge. The documentation include identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged, and the method that will be used by Bank Indonesia to assess the effectiveness of the hedging instrument in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. the hedge is expected to be highly effective (see paragraph PP131-PP142) in achieving offsetting changes in fair value or changes in cash flows attributable to the hedged risk, consistently with the originally documented risk management strategy for that particular hedging relationship. for cash flow hedges, a forecast transaction that is the subject of the hedge must be highly probable and must present an exposure to variations in cash flows that could ultimately affect surplus deficit. the effectiveness of the hedge can be reliably measured, i.e., the fair value or cash flows of the hedged item that are attributable to the hedged risk and the fair value of the hedging instrument can be reliably measured (see paragraphs PP92, PP93, and PKAK 07: Non-unique Transactions, as a guide in determining fair value). the hedge is assessed on an ongoing basis and determined actually to have been highly effective throughout the financial reporting period for which the hedge was designated. Fair Value Hedges 106. If a fair value hedge meets the conditions in paragraph 105 during the financial reporting period, it shall be accounted for as follows: (a) the gain or loss from remeasuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign currency component of its carrying amount measured by PKAK 03: The Effects of Changes in Foreign Exchange Rates (for a nonderivative hedging instrument) shall be recognised in financial instruments revaluation reserves; (b) the gain or loss on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognised in financial instruments revaluation reserves; and 6.31 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
127. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (c) the amount of net profit or loss in points a and b above is recognised in surplus deficit when hedge accounting is discontinued, as described in paragraph 109. 107. For a fair value hedge of the interest rate exposure of a portion of a portfolio of financial assets or financial liabilities (and only in such a hedge), the requirement in paragraph 89(b) may be met by presenting the gain or loss attributable to the hedged item either: (a) in a single separate line item within assets, for those repricing time periods for which the hedged item is an asset; or (b) in a single separate line item within liabilities, for those repricing time periods for which the hedged item is a liability. The separate line items referred to in (a) and (b) above are derecognised when the assets or liabilities to which they relate are derecognised. 108. If only certain particular risks attributable to a hedged item are hedged, recognised changes in the fair value of the hedged item, unrelated to the hedged risk, are recognised as set out in paragraph 69. 109. Bank Indonesia shall discontinue prospectively the application of hedge accounting as described in paragraphs 106 if: (a) the hedging instrument expires or is sold, terminated or exercised (for this purpose, the replacement or rollover of a hedging instrument into another hedging instruments cannot be considered as an expiration or termination if such replacement or rollover is part of Bank Indonesia‟s documented hedging strategy); (b) the hedge no longer meets the criteria for hedge accounting in paragraph 105; or (c) Bank Indonesia revokes the designation. 110. Any adjustment arising from paragraph 106 (b) to the carrying amount of a hedged financial instrument for which the effective interest method is used (or, in the case of a portfolio hedge of interest rate risk; to the separate line item in the statement of financial position as described in paragraph 107) shall be amortised to surplus deficit. Amortization may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the hedged risk. The adjustment is based on a recalculated effective interest rate at the date amortization begins. However, in the case of a fair value hedge of the interest rate exposure of a portfolio of financial assets or financial liabilities (and only in such a hedge), if amortization using a recalculated effective interest rate is not practicable, the adjustment 6.32 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
128. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 shall be amortised using a straight-line method. The adjustment shall be amortised fully by maturity of the financial instrument or, in the case of a portfolio hedge of interest rate risk, by expiry of the relevant repricing time period. 111. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in financial instruments revaluation reserves (see paragraph 106(b)). The changes in the fair value of the hedging instrument are also recognised in financial instrument revaluation reserves. 112. When Bank Indonesia enters into a firm commitment to acquire an asset or assume a liability that is a hedged item in a fair value hedge, the initial carrying amount of the asset or liability that results from Bank Indonesia meeting the firm commitment is adjusted to include the cumulative change in the fair value of the firm commitment attributable to the hedged risk that was recognised in the statement of financial position. Cash Flow Hedges 113. If a cash flow hedge meets the conditions in paragraph 105 during the period, then the portion of the gain or loss on the hedging instrument shall be recognised in financial instruments revaluation reserves. 114. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gains or losses for the hedge that were previously recognised in financial instruments revaluation reserves in accordance with paragraph 113 shall be recognised in surplus deficit in the same period or periods during which the acquired asset or assumed liability affects surplus deficit (such as in the period that interest income or interest expense is recognised). If Bank Indonesia expects that all or a portion of a loss recognised in financial instruments revaluation reserves will not be recovered in one or more future periods, it shall continue to recognise the amount that is not expected to be recovered in financial instruments revaluation reserves. 115. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, or a forecast transaction for a non-financial asset or non-financial 6.33 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
129. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 liability becomes a firm commitment for which fair value hedge accounting is applied, then Bank Indonesia shall adopt (a) or (b) below: (a) Bank Indonesia reclassifies the associated gains and losses for the hedge that were previously recognised in financial instrument revaluation reserves in accordance with paragraph 113 to surplus deficit in the same period or periods during which the asset acquired or liabilities assumed affects surplus deficit (such as in periods that depreciation expense is recognised). If Bank Indonesia expects that all or a portion of the loss recognised in financial instruments revaluation reserves will not be recovered in one or more future periods, then Bank Indonesia shall continue to recognise the amount that is not expected to be recovered in financial instruments revaluation reserves. (b) Bank Indonesia removes the associated gains and losses that were previously recognised in financial instruments revaluation reserves in accordance with paragraph 113, and includes them in the initial cost or other carrying amount of the asset or liability. 116. Bank Indonesia applies either (a) or (b) in paragraph 115 as its accounting policy and shall apply it consistently to all hedges to which paragraph 115 relates. 117. For cash flow hedges other than hedges covered by paragraphs 114 and 115, amounts that had been recognised in financial instruments revaluation reserves shall be recognised in surplus deficit (see PKAK 02: Presentation of Financial Statements) in the same period or periods during which the hedged forecast transaction affects surplus deficit. 118. In any of the following circumstances, Bank Indonesia shall prospectively discontinue the application of hedge accounting as described in paragraphs 113-117: (a) the hedging instrument expires or is sold, terminated or exercised (for the purposes of this paragraph, the replacement or rollover of a hedging instrument into another hedging instrument cannot be considered as an expiration or termination if such replacement or rollover is part of Bank Indonesia‟s document hedging strategy). In this case, the cumulative gain or loss on the hedging instrument that has been recognised in financial instruments revaluation reserves from the period when the hedge was effective (see paragraph 113) shall continue to be recognised 6.34 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
130. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (b) (c) (d) until the forecast transaction occurs. When the transaction occurs, paragraph 114 or 117 applies. the hedge no longer meets the criteria for hedge accounting in paragraph 105. In this case, the cumulative gain or loss on the hedging instrument that has been recognised in financial instruments revaluation reserves from the period when the hedge was executed (see paragraph 113) continues to be recognised until the hedging instrument is derecognised. When the transaction occurs, paragraph 114 or 117 applies. The forecast transaction is no longer expected to occur, in which case any related cumulative gain or loss on the hedging instrument that has been recognised in financial instruments revaluation reserves from the period when the hedge was executed (see paragraph 113) continues to be recognised in financial instruments revaluation reserves until the hedging instrument is derecognised. A forecast transaction that is no longer highly probable (see paragraph 105(c)) may still be expected to occur. Bank Indonesia revokes the designation. For hedges of a forecast transaction, the cumulative gain or loss on the hedging instrument that has been recognised in financial instruments revaluation reserves from the period when the hedge was executed (see paragraph 113) continues to be recognised in financial instruments revaluation reserves until the hedging instrument is derecognised. If the forecast transaction occurs, then paragraph 114 or 117 applies. PRESENTATION 119. Bank Indonesia at the time of initial recognition shall classify the instrument, or its component parts, on initial recognition as a financial asset or a financial liability in accordance with the substance of the contractual arrangement and the definitions of a financial asset or financial liability. Revaluation Reserves 120. Gains and losses on changes in the fair value of financial assets or financial liabilities are presented in the revaluation reserves in the statement of financial position. 6.35 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
131. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Offsetting a Financial Asset and a Financial Liability (See also Paragraphs PP162 and PP163) 121. A financial asset and a financial liability shall be offset and the net amount is presented in the statement of financial position if, and only if, Bank Indonesia: (a) currently has a legally enforceable right to set off the recognised amounts; and (b) intends to settle on a net basis or to realise the asset and settle the liability simultaneously. In accounting for a transfer of a financial asset that does not qualify for derecognition, Bank Indonesia shall not offset the transferred financial assets and associated liabilities (see paragraph 32). 122. This Statement requires the presentation of financial assets and financial liabilities on a net basis when doing so reflects Bank Indonesia‟s expected future cash flows from settling two or more separate financial instruments. If Bank Indonesia has the right to receive or pay a certain net amount and intends to do so, it has only one single financial asset or financial liability. In other circumstances, financial assets and financial liabilities are presented separately from each other and consistent with their characteristics, as resources or obligations of Bank Indonesia. 123. Offsetting a recognised financial asset and a recognised financial liability and presenting the net amount differs from derecognition of a financial asset or financial liability. Although offsetting does not give rise to recognition of a gain or loss, the derecognition of a financial instrument not only results in the removal of the previously recognised item from the statement of financial position, but may also result in recognition of a gain or loss. 124. A right to set-off is a debtor's legal right, by contract or otherwise, to settle or eliminate all or a portion of an amount due to a creditor by applying against that amount an amount due from the creditor. In unusual circumstances, a debtor may have a legal right to apply an amount due from a third party against the amount due to a creditor provided that there is an agreement between the three parties that clearly establishes the debtor's right of set-off. Because the right of set-off is a legal right, the conditions supporting the right may vary from one legal jurisdiction to another, and the laws applicable to the relationships between the parties need to be considered. 125. The existence of an enforceable right to set-off a financial asset and a financial liability affects the rights and obligations associated with a 6.36 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
132. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 financial asset and a financial liability, and may affect Bank Indonesia‟s exposure to credit risk. Nevertheless, the existence of the right, by itself, is not a sufficient basis for offsetting. In the absence of an intention to exercise the right or to settle simultaneously, the amount and timing of Bank Indonesia‟s future cash flows are not affected. When Bank Indonesia intends to exercise the right or settle simultaneously, presentation of the asset and liability on a net basis reflects more appropriately the amounts and timing of the expected future cash flows, as well as the risks to which those cash flows are exposed. An intention by one or both parties to settle on a net basis without the legal right to do so is not sufficient to justify offsetting because the rights and obligations associated with the individual financial asset and financial liability remain unaltered. 126. Bank Indonesia‟s intentions with respect to the settlement of particular assets and liabilities may be influenced by its normal business practices, the requirements of the financial markets, and other circumstances that may limit the ability of Bank Indonesia to settle net or settle simultaneously. When Bank Indonesia bank has a right of set-off, but does not intend to settle net or to realise the asset and settle the liability simultaneously, the effect of such right against Bank Indonesia‟s credit risk exposure is disclosed. 127. Simultaneous settlement of two financial instruments may occur through, for example, the operation of a clearing house in an organised financial market or a face-to-face exchange. In these circumstances, the cash flows are, in effect, equivalent to a single net amount and there is no credit risk exposure. In other circumstances, Bank Indonesia may settle two instruments by receiving and paying separate amounts. Such risk exposures may be significant even though relatively brief. Accordingly, realisation of a financial asset and settlement of a financial liability are treated as occurring simultaneously only if both transactions occur at the same moment. 128. The conditions set out in paragraph 121 are generally not satisfied and offsetting is usually inappropriate when: (a) several different financial instruments are used to emulate the features of a single financial instrument (a “synthetic instrument”); (b) financial assets and financial liabilities arise from financial instruments having the same primary risk exposure (for example, assets and liabilities within a portfolio of forward contracts or other derivative instruments) but involve different counterparties; (c) financial or other assets are pledged as collateral for non-recourse financial liabilities; (d) financial assets are set aside by a debtor in trust for the purpose of discharging an obligation without those assets having been accepted 6.37 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
133. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (e) by the creditor in settlement of the obligation(for example, a sinking fund arrangement); or obligations incurred as a result of events giving rise to losses are expected to be recovered from a third party by virtue of a claim made under an insurance contract. 129. Bank Indonesia can perform a number of financial instrument transactions with a single counterparty, by entering into a "master netting arrangement" with that counterparty. Such an agreement provides for a single net settlement of all financial instruments covered by the agreement in the event of default on, or termination of, any one contract. These arrangements are commonly used by financial institutions to protect against loss in the event of bankruptcy or other circumstances that result in a counterparty being unable to meet its obligations. A master netting arrangement commonly creates a right of set-off that becomes enforceable and affects the realisation or settlement of individual financial assets and financial liabilities only following a specified event of default or in other circumstances that are not expected to arise in the normal course of business. A master netting arrangement to settle does not provide a basis for offsetting unless both of the criteria in paragraph 121 are met. When financial assets and financial liabilities subject to a master netting arrangement are not offset, the effect of the arrangement on Bank Indonesia‟s exposure to credit risk is disclosed. DISCLOSURE Classes of Financial Instruments and Level of Disclosure 130. When this Statement requires disclosure based on class of financial instrument, Bank Indonesia shall group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of the financial instruments. Bank Indonesia shall provide sufficient information to permit reconciliation to the line items presented in the statement of financial position. Statement of Financial Position Categories of Financial Assets and Financial Liabilities 131. The carrying amounts of each of the following categories, as defined in this Statement, shall be disclosed either in the statement of financial position and notes to financial statements: (a) financial assets at fair value through revaluation reserves; (b) financial assets measured at amortised cost; 6.38 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
134. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (c) (d) financial liabilities at fair value through revaluation reserves; and financial liabilities measured at amortised cost. Reclassification 132. When Bank Indonesia has reclassified financial assets (in accordance with paragraphs 66-67) measured: (a) at amortised cost to fair value through revaluation reserves; or (b) at fair value through revaluation reserves to the amortised cost, Bank Indonesia shall disclose the amount reclassified into and out of each category and the reason for reclassification. 133. If Bank Indonesia has reclassified a financial asset from measurement at fair value through revaluation reserves in accordance with paragraph 66 or 67, then Bank Indonesia shall disclose: (a) the amounts reclassified to and from each category; and (b) if a financial asset is reclassified in accordance with paragraph 67, a rare situation is disclosed, together with the facts and circumstances that indicate that such a situation is rare. 134. Bank Indonesia shall disclose the reconciliation of the amounts in the financial instruments revaluation reserves at the beginning and end of the period. Reconciliation of the financial instruments revaluation reserves is disclosed by showing: (a) changes in financial instruments revaluation reserves due to changes in fair value; (b) changes in the financial instruments revaluation reserves attributable to transfers to the surplus deficit as a result of the financial asset being derecognised, reclassified, or impaired; and (c) changes in the financial instruments revaluation reserves attributable to transfer to the surplus deficit as a result of the derecognition of a financial liability. (d) changes in the financial instruments revaluation reserves attributable to transfers to the surplus deficit as a result of the application hedge accounting on cash flow hedge in accordance with paragraph 114 (this disclosure is required in order to obtain a balanced reconciliation, however disclosure of the portion of the revaluation reserves that is transferred to surplus deficit in connection with hedge accounting on cash flow hedge may involve sensitive information). (e) Related to a fair-value hedge. 6.39 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
135. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Derecognition 135. Bank Indonesia may have transferred financial assets in such a way that part or all of the financial assets do not qualify for derecognition (see paragraphs 12-33). In this respect, Bank Indonesia shall disclose for each class of financial asset: (a) the asset type; (b) if Bank Indonesia continues to recognise all of the assets, the carrying amounts of the assets and the associated liabilities; and (c) if Bank Indonesia continues to recognise assets to the extent of its continuing involvement, the total carrying amount of the original assets, the amount of assets that Bank Indonesia continues to recognise, and the carrying amount of the associated liabilities. Collateral 136. Bank Indonesia shall disclose the carrying amount of financial assets pledged as collateral for liabilities or contingent liabilities, including amounts that have been reclassified in accordance with paragraph 33 (a). Allowance Account for Credit Losses 137. When financial assets are impaired due to credit losses, Bank Indonesia shall record the impairments by directly reducing the carrying amount of the financial assets rather than in separate accounts. Bank Indonesia shall disclose the total amount of the impairments during the period for each class of financial assets. Statement of Surplus Deficit Income, Expenses, Gains or Losses Accounts 138. Bank Indonesia discloses income, expenses, gains or losses in the statement of surplus deficit or notes to financial statements: (a) net gains or net losses on: (i) financial assets or financial liabilities at fair value through revaluation reserves, (ii) financial assets measured at amortised cost. (iii) financial liabilities measured at amortised cost. (b) total interest income and total interest expenses (calculated using the effective interest method) for financial assets or financial liabilities that are not measured at fair value through revaluation reserves; (c) fee income and expenses (other than amounts included in determining the effective interest rate) arising from: 6.40 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
136. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (i) (d) (e) financial assets or financial liabilities that are not measured at fair value through revaluation reserves; and (ii) trust and other fiduciary activities that result in the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans, and other institutions; interest income on impaired financial assets accrued in accordance with paragraph PP118; and the amounts of impairment loss for each class of financial asset. Other Disclosures Accounting Policies 139. In accordance with PKAK 02: Presentation of Financial Statements, paragraph 61, Bank Indonesia discloses in the summary of significant accounting policies the measurement basis (or bases) used in preparing the financial statements and other accounting policies that are relevant to an understanding of the financial statements. Fair Value (a) (b) 140. Bank Indonesia discloses the following information: for financial assets and liabilities measured at fair value in the statement of financial position after initial recognition, the valuation techniques and inputs used to develop measurements. for the fair value measurement using significant unobservable inputs (Level 3), the effect of the measurement on the financial instruments revaluation reserves for the period. 141. To meet the objective set out in paragraph 140 above, Bank Indonesia shall consider all of the following: (a) the level of detail required to satisfy the disclosure requirements; (b) how much emphasis to place on each of the various requirements; (c) how much aggregation or disaggregation to undertake; and (d) whether the users of the financial statements need additional information to evaluate the quantitative information disclosed. If the disclosure provided in accordance with this Statement and other statements are insufficient to meet the objectives of paragraph 140, Bank Indonesia shall disclose such additional information as may be necessary to meet those objectives. 142. To meet the objective in paragraph 140, Bank Indonesia shall disclose, at a minimum, the following information for each class of financial asset and liability (see paragraph 143 for information on determining 6.41 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
137. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 appropriate classes of assets and liabilities), measured at fair value through the revaluation reserves in the statement of financial position after initial recognition: (a) the fair value measurement at the end of reporting period (b) the level of the fair value hierarchy within which the fair value measurements are categorised in their entirety (Level 1, 2, or 3). (c) the amount of any transfers between Level 1 and Level 2 of the fair value hierarchy, the reasons for such transfers and Bank Indonesia policies for determining when transfers between levels is deemed to have occurred (see paragraph 144). Transfers into each level is disclosed and discussed separately from transfers out of each level. (d) for fair value measurements categorised within Level 2 and Level 3 of the fair value hierarchy, a description of the valuation technique(s)and inputs used in measuring fair value. If there has been a change in valuation technique (e.g., a change from a market approach to an income approach or the use of an additional assessment technique), Bank Indonesia shall disclose such changes and the reason(s) for making it. For fair value measurements categorised within Level 3 of the fair value hierarchy, Bank Indonesia shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. Bank Indonesia is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by Bank Indonesia when measuring fair value (for example, when Bank Indonesia uses the price from prior transaction or third-party pricing information without adjustment). However, when providing this disclosure Bank Indonesia cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to Bank Indonesia. (e) for fair value measurements categorised within Level 3 of the fair value hierarchy, a reconciliation of the opening balance to the closing balance, disclosing separately changes during the period attributable to the following: (i) total realised gains or losses for the period recognised in the surplus deficit and the line item(s) in surplus deficit in which those gains or losses are recognised. (ii) total gains or losses for the period recognised in financial instruments revaluation reserves, and the line item(s) in financial instrument revaluation reserves where the gains or losses are recognised. (iii) purchases, sales, issues and settlements (each type of those changes disclosed separately). (iv) the amount of any transfer into or out of the Level 3 of the fair value hierarchy, the reasons for those transfers and Bank 6.42 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
138. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Indonesia policy for determining when transfers between levels are deemed to have occurred (see paragraph 144). Transfers to Level 3 shall be disclosed and discussed separately from transfers out of Level 3 (f) for fair value measurements categorised within Level 3 of the fair value hierarchy, a description of the valuation process used by Bank Indonesia (including, for example, how Bank Indonesia decides its valuation policies and procedures, and analyses changes in fair value measurement from period to period). (g) for fair value measurements categorised within Level 3 of the fair value hierarchy: (i) for all such measurements, a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. If there are interrelationships between those inputs and other unobservable inputs used in the fair value measurement, Bank Indonesia shall also provide a description of those interrelationships and of how they might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement. To comply with that disclosure requirement, the narrative description of the sensitivity to changes in unobservable inputs shall include, at a minimum, the unobservable inputs disclosed when complying with (d). (ii) for financial assets and financial liabilities, if changing one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would change the fair value significantly, Bank Indonesia shall state that fact and disclose the effect of those changes. Bank Indonesia shall disclose how the effect of a change to reflect a reasonably possible alternative assumption was calculated. For that purpose, significance shall be judged with respect to the total revaluation reserves, capital, and accumulated surplus deficit. 143. Bank Indonesia shall determine appropriate classes of assets and liabilities on the basis of the following: (a) the nature, characteristics and risks of the asset or liability; and (b) the level of the fair value hierarchy within which the fair value measurement is categorised. The number of classes may need to be greater for fair value measurements categorised within Level 3 of the fair value hierarchy because those measurements have a greater degree of uncertainty and subjectivity. Determining the appropriate classes of financial assets or liabilities for which disclosures about fair value measurements should be provided requires 6.43 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
139. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 judgment. A class of assets and liabilities will often require greater disaggregation than the line items presented in the statement of financial position. However, Bank Indonesia shall provide sufficient information to permit reconciliation to the line items presented in the statement of financial position. 144. Bank Indonesia shall disclose and consistently follow its policy for determining when transfers between levels of the fair value hierarchy are deemed to have occurred in accordance with paragraph 142(c) and (e)(iv). The policy about the timing of recognising transfers shall be the same for transfers into the levels as for transfers out of the levels. Examples of policies for determining the timing of transfers include the following: (a) the date of the event or the change in circumstances that caused the transfer. (b) the beginning of the reporting period. (c) the end of the reporting period. 145. Bank Indonesia may have a group of financial assets and financial liabilities that are exposed to market risk and credit risk in respect of each counterparty. When Bank Indonesia manages that group of financial assets and financial liabilities on the basis of its net exposure to either market risk or credit risk, Bank Indonesia is permitted to apply exceptions to this Statement in measuring fair value. That exception permits Bank Indonesia to measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell on the net long position (i.e. an asset) for certain risk exposures or paid to transfer the net short position (i.e. a liability) for a particular risk exposures in orderly transactions between market participants on the measurement date under current market conditions. In line with this, Bank Indonesia shall measure the fair value of the groups of financial assets and financial liabilities consistently with how market participants would price the net risk exposure at the measurement date. If Bank Indonesia resolves to use the accounting policy exception in this paragraph, then Bank Indonesia must disclose this fact. 146. For financial liabilities measured at fair value through revaluation reserves and issued based on an increase in the inseparable third party credit enhancement, Bank Indonesia shall disclose the existence of that credit enhancement and 
whether it is reflected in the fair value measurement of the liability. 147. Bank Indonesia shall present the quantitative disclosures required by this Statement in tabular format unless another format is more appropriate. 6.44 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
140. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Risk Management Associated with Financial Instruments 148. Bank Indonesia discloses information that enables users of its financial statements to obtain an overview of the management of risks arising from financial instruments to which Bank Indonesia is exposed at the end of the reporting period. 149. The disclosure required under paragraph 150 focuses on the risks arising from financial instruments and how these risks have been managed. These risks typically include, but are not limited to, credit risk, liquidity risk, and market risk. 150. For each type of risk arising from financial instruments, Bank Indonesia shall disclose: (a) the exposure to risks and how those risks arise; (b) the objectives, policies, and risk management processes and methods used to measure the risk; and (c) any changes in (a) or (b) from the previous period. TRANSITIONAL PROVISIONS 151. This Statement shall be applied prospectively, and shall also apply to financial instrument balances existing on the effective date. EFFECTIVE DATE 152. This Statement shall be effective counting from such date as may be stipulated by Bank Indonesia Board of Governors‟ Regulation. 6.45 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
141. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 APPENDIX APPLICATION GUIDELINES This appendix is an integral part of PKAK 06. It describes the application of paragraphs 01-152 and is of the same effect as the other parts of PKAK 06. INTRODUCTION (PARAGRAPHS 01-09) Scope PP01. Financial guarantee contracts may have various legal forms, such as guarantees, some types of letter of credit and credit default contracts. The accounting treatment of these contracts does not depend on their legal form. For example, some credit-related guarantees do not, as a precondition for payment, require that the holder is exposed to, and has incurred a loss on, the failure of the debtor to make payments on the guaranteed asset when due. An example of such a guarantee is one that requires payments in response to changes in a specified credit rating or credit index. Such guarantees are not financial guarantee contracts, as defined in this Statement. Such guarantees are derivatives and the issuer applies this Statement to them. Definitions Financial Assets and Financial Liabilities PP02. Currency (cash) is a financial asset because it represents the medium of exchange and is therefore the basis on which all transactions are measured and recognised in financial statements. A deposit of cash with a bank or similar financial institution is a financial asset because it provides a contractual right to the depositor to obtain cash from the institution or to draw a cheque or similar instrument against the balance in favour of a creditor in payment of a financial liability. PP03. Common examples of financial assets representing a contractual right to receive cash in the future and corresponding financial liabilities representing a contractual obligation to deliver cash in the future are: (a) notes receivable and notes payable; (b) loans receivable and payable; and (c) claims and debt securities. In each case, one party's contractual right to receive (or obligation to pay) cash is matched by the other party's corresponding obligation to pay (or right to receive). 6.46 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
142. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 PP04. Another type of financial instrument is one for which the economic benefit to be received or given up is a financial asset other than cash. For example, a financial instrument that gives the holder a contractual right to receive and the issuer the contractual obligation to deliver government bonds, not cash. The bonds are financial assets because they reflect the obligation of the issuing government to pay cash. The note is, therefore, a financial asset of the note holder and a financial liability of the note issuer. PP05. Perpetual debt instruments (such as perpetual bonds, debentures and capital notes) normally provide the holder with the contractual right to receive payments on account of interest at fixed dates extending into the indefinite future, either with no right to receive a return of principal or a right to a return of principal under terms that make it very unlikely or very far in the future. For example, Bank Indonesia may issue a financial instrument requiring it to make annual payments in perpetuity equal to a stated interest rate of 8% applied to a stated par or principal amount of Rp1,000. Assuming 8% to be the market rate of interest for the instrument when issued, the issuer assumes a contractual obligation to make a stream of future interest payments having a fair value (present value) of Rp1,000 on initial recognition. The holder of the instrument is the owner of a financial asset and while Bank Indonesia is the holder of a financial liability. PP06. A contractual right or obligation to receive, deliver or to exchange financial instruments is itself a financial instrument. A chain of contractual rights or obligations satisfies the definition of a financial instrument if the rights or obligations will ultimately lead to the receipt or payment of cash. PP07. The ability to exercise a contractual right or the requirement to satisfy a contractual obligation may be absolute, or it may be contingent on the occurrence of a future event. For example, a financial guarantee is a contractual right for of the lender to receive cash from the guarantor, and a corresponding contractual obligation of the guarantor to pay the lender, if the borrower defaults. The contractual right and obligation exist because of a past transaction or event (assumption of the guarantee), even though the lender's ability to exercise its right and the requirement for the guarantor to perform under its obligation are both contingent on a future act of default by the borrower. A contingent right and obligation meet the definition of a financial asset and a financial liability, even though such assets and liabilities are not always recognised in the financial statements. Derivatives PP08. Typical examples of derivatives are futures and forward contracts, swaps, and options. A derivative usually has a notional amount, 6.47 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
143. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 which is an amount of currency, a number of shares, a number of units of weight or volume or other units specified in the contract. However, a derivative instrument does not require the holder or writer to invest or receive the notional amount at the inception of the contract. Alternatively, a derivative could require a fixed payment or payment of an amount that can change (but not proportionally with a change in the underlying) as a result of some future event that is unrelated to a notional amount. For example, a contract requires a fixed payment of Rp1,000 if the six month JIBOR increases by 100 basis points. This contract is a derivative even though the notional amount is not specified. PP09. The definition of a derivative in this Statement includes contracts that are settled gross by delivery of the underlying item (e.g., a forward contract to purchase a fixed rate debt instrument). Bank Indonesia may have a contract to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging financial instruments (e.g., a contract to buy or sell a commodity at a fixed price at a future date). Such a contract is within the scope of this Statement unless it was entered into and continues to be held for the purpose of delivery of a non-financial item in accordance with the Bank Indonesia‟s expected purchase, sale or usage requirements (see paragraphs 05-07). PP10. One of the characteristics of a derivative is that it requires an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. An option contract meets this definition because the premium is less than the investment that would be required to obtain the underlying financial instrument to which the option is linked. A currency swap that requires an initial exchange of different currencies of equal fair values meets the definition because it has a zero initial net investment. PP11. A regular purchase or sale that gives rise to a fixed price commitment between trade date and settlement date that meets the definition of a derivative. However, because of the short duration of the commitment it is not recognised as a derivative financial instrument. Rather, this Statement provides for special accounting for such regular way contracts (see paragraph 11 and PP24-PP27). PP12. Financial instruments include primary instruments (such as receivables and payables) and derivative financial instruments (such as options, futures and forwards, interest rate swaps, and currency swaps). Derivative financial instruments meet the definition of a financial instrument and, accordingly, are within the scope of this Statement. 6.48 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
144. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 PP13. Derivative financial instruments create rights and obligations that have the effect of transferring between the parties to the instrument one or more of the financial risks inherent in an underlying primary financial instrument. On inception, derivative financial instruments give one party a contractual right to exchange financial assets or financial liabilities with another party under conditions that are potentially favourable, or a contractual obligation to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable. However, they generally do not result in a transfer of the underlying primary financial instrument on inception of the contract, nor does such a transfer necessarily take place on maturity of the contract. Some instruments embody both a right and an obligation to make an exchange. Because the terms of the exchange are determined on inception of the derivative instrument, as prices in financial markets change those terms may become either favourable or unfavourable. PP14. A put option or call option to exchange financial assets or financial liabilities gives the holder a right to obtain potential future economic benefits associated with changes in the fair value of the financial instruments underlying the contract. Conversely, the writer of an option assumes an obligation to forgo potential future economic benefits or bear potential losses of economic benefits associated with changes in the fair value of the underlying financial instrument. The contractual right of the holder and obligation of the writer meet the definition of a financial asset and a financial liability, respectively. The financial instrument underlying an option contract may be any financial asset, including shares in other entities and interest-bearing instruments. An option may require the writer to issue a debt instrument, rather than transfer a financial asset, but the instrument underlying the option would constitute a financial asset of the holder if the option were exercised. The option-holder's right to exchange the financial asset under potentially favourable conditions and the writer's obligation to exchange the financial asset under potentially unfavourable conditions are distinct from the underlying financial asset to be exchanged upon exercise of the option. The nature of the holder's right and of the writer's obligation are not affected by the likelihood that the option will be exercised. PP15. Another example of a derivative financial instrument is a forward contract to be settled in six months' time in which one party (the purchaser) promises to deliver Rp1,000,000 cash in exchange for Rp1,000,000 face amount of fixed rate government bonds, and the other party (the seller) promises to deliver CU1,000,000 face amount of fixed rate government bonds in exchange for Rp1,000,000 cash. During the six month period, both parties have a contractual right and a contractual obligation to exchange financial instruments. If the market price of the government bonds rises above 6.49 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
145. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Rp1,000,000, the conditions will be favourable to the purchaser and unfavourable to the seller; if the market price falls below Rp1,000,000the effect will be the opposite. The purchaser has contractual right (a financial asset) that is similar to the right under a call option held and a contractual obligation (a financial liability) similar to the obligation under a put option written; the seller has a contractual right (a financial asset) similar to the right under a put option held and a contractual obligation (a financial liability) similar to the obligation under a call option written. As with options, these contractual rights and obligations constitute financial assets and financial liabilities separate and distinct from the underlying financial instruments (the bonds and cash to be exchanged). Both parties to a forward contract have an obligation to perform at the agreed time, whereas performance under an option contract occurs only if and when the holder of the option chooses to exercise it. PP16. Many other types of derivative instruments embody a right or obligation to make future exchanges, including interest rate swaps and currency swaps, interest rate caps, collars and floors, loan commitments, note issuance facilities and letters of credit. An interest rate swap contract may be viewed as a variation of a forward contract in which the parties agree to make a series of future exchanges of cash amounts, one amount calculated with reference to a floating interest rate and the other with reference to a fixed interest rate. Futures contracts are another variation of forward contracts, differing primarily in that the contracts are standardised and traded on an exchange. Contracts to Buy or Sell Non-financial Items PP17. Contracts to buy or sell non-financial items do not meet the definition of a financial instrument because the contractual right of one party to receive a non-financial asset or service and the corresponding obligation of the other party do not establish a present right or obligation of either party to receive, deliver or exchange a financial asset. For example, contracts that provide for settlement only by the receipt or delivery of nonfinancial items (such as options, futures contracts or forward contracts on gold) are not financial instruments. Many commodity contracts are of this type. Some are standardised in form and traded on organised markets in much the same fashion as some derivative financial instruments. For example, gold futures contracts bought and sold readily for cash because it is listed for trading on an exchange and may change hands many times. However, the parties buying and selling the contract are, in effect, trading the underlying commodity. The ability to buy or sell a commodity contract for cash, the ease with which it may be bought or sold and the possibility of negotiating a cash settlement of the obligation to receive or deliver the 6.50 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
146. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 commodity do not alter the fundamental character of the contract in a way that creates a financial instrument. Nevertheless, some contracts to buy or sell non-financial items that can be settled net or by exchanging financial instruments, or in which the non-financial item is readily convertible to cash, are within the scope of the Statement as if they were financial instruments (see paragraph 05). PP18. A contract that involves the receipt or delivery of physical assets does not give rise to a financial asset of one party and a financial liability of the other party unless any corresponding payment is deferred past the date on which the physical assets are transferred. Such is the case with the purchase or sale of a fixed asset on credit. PP19. Some contracts are commodity-linked contracts, but do not involve settlement through the physical receipt or delivery of a commodity. They specify settlement through cash payments that are determined according to a formula in the contract, rather than through payment of fixed amounts. For example, the principal amount of a bond may be calculated using the market price of gold at the time of the bond‟s maturity, multiplied by a predetermined quantity of gold. The principal amount of the bond is indexed by reference to a commodity price, but is settled only in cash. Such a contract constitutes a financial instrument. PP20. The definition of financial instrument also encompasses a contract that give rise to a non-financial asset or non-financial liability in addition to a financial asset or financial liability. Such financial instruments often give one party an option to exchange financial assets for non-financial assets. For example, bonds associated with gold (gold bonds) may give the holder the right to receive a stream of fixed periodic interest payments and a fixed amount of cash on maturity, with the option to exchange the principal amount of the bond for a predetermined quantity of gold. The desirability of exercising this option will vary from time to time depending on the fair value of gold relative to the exchange ratio of cash for gold (the exchange price) inherent in the bond. The intentions of the bondholder concerning the exercise of the option do not affect the substance of the component assets. The financial asset of the holder and the financial liability of the issuer make the bond a financial instrument, regardless of the other types of assets and liabilities also created. Transaction Costs PP21. Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes 6.51 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
147. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs. RECOGNITION AND DERECOGNITION (PARAGRAPHS 10-37) Initial Recognition PP22. As a consequence of the principle set out in paragraph 10, Bank Indonesia recognises all of its contractual rights and obligations under derivatives in its statement of financial position as assets and liabilities, respectively, except for derivatives that prevent a transfer of financial assets from being accounted for as a sale (see paragraph PP40). If a transfer of a financial asset does not qualify for derecognition, the transferee does not recognise the transferred asset as its asset (see paragraph PP41). PP23. The following are examples of applying the principle in paragraph 10: (a) (b) (c) Unconditional receivables and payables are recognised as assets or liabilities when Bank Indonesia becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash. Assets to be acquired and liabilities to be incurred as a result of a firm commitment to purchase or sell goods or services are generally not recognised until at least one of the parties has performed under the agreement. For example, when Bank Indonesia receives a firm order, it does not generally recognise an asset (and the entity that places the order does not recognise a liability) at the time of the commitment but, rather, delays recognition until the ordered goods or services have been shipped, delivered or rendered. If a firm commitment to buy or sell a non-financial item comes within the scope of this Statement based on paragraphs 05-07, then the net fair value is recognised as an asset or liability on the commitment date (see sub-paragraph (c) below). In addition, if a previously unrecognised firm commitment is designated as a hedged item in a fair value hedge, any change in the net fair value attributable to the hedged risk is recognised as an asset or liability after the inception of the hedge (see paragraphs 111 and 112). A forward contract that is within the scope of this Statement (see paragraphs 02-07) is recognised as an asset or a liability on the commitment date, rather than on the date on which settlement takes place. When Bank Indonesia becomes a party to a forward contract, the fair values of the right and obligation are often equal, so that the net fair value of the forward is zero. If the net fair value of the right and obligation is not zero, the contract is recognised as an asset or liability. 6.52 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
148. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (d) (e) options contracts that come within the scope of this Statement (see paragraphs 02-07) are recognised as assets or liabilities if the holder or writer becomes a party to the contract. planned future transactions, no matter how likely, are not assets and liabilities because Bank Indonesia has not become a party to a contract. Regular Purchases/ Sales of Financial Assets PP24. A regular way purchase or sale of financial assets is recognised using either trade date accounting or settlement date accounting, as described in paragraphs PP26 and PP27. The method used is applied consistently to all purchases and sales of financial assets in the same category of financial assets, as defined in paragraph 62. For this purpose, assets that must be measured at fair value through revaluation reserves form a separate category from those that are designated for measurement at fair value through revaluation reserves. PP25. A contract that requires or permits net settlement of the change in the value of the contract is not a regular way contract. Instead, such a contract is accounted for as derivatives in the period between the trade date and the settlement date. PP26. The trade date is the date on which Bank Indonesia commits itself to purchase or sell an asset. Trade date accounting refers to (a) the recognition of an asset to be received and the liability to pay for it on the trade date, and (b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date. Generally, interest does not start to accrue on the asset and corresponding liability until the settlement date when title passes. PP27. The settlement date is the date on which an asset is delivered to or by Bank Indonesia. Settlement date accounting refers to (a) the recognition of an asset on the date on which the item is received by Bank Indonesia, and (b) derecognition of an asset and recognition of any gain or loss on the disposal of the asset on the day that it is delivered by Bank Indonesia. When settlement date accounting is applied, Bank Indonesia records the change in fair value of the asset received between the transaction date and the settlement date in the same way as Bank Indonesia accounts for any change in the fair value of the asset to be received during the period between the trade date and the settlement date in the same way as it accounts for the acquired asset. In other words, the change in value is not recognised for assets measured at amortised cost; it is recognised in financial instrument 6.53 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
149. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 revaluation reserves for assets classified as financial assets measured at fair value through revaluation reserves. Derecognition of Financial Assets PP28. The following flow chart illustrates the evaluation of whether and to what extent a financial asset is derecognised. 6.54 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
150. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Arrangements under which Bank Indonesia retains the contractual rights to receive the cash flows of a financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients (paragraph 14(b)) PP29. The situation described in paragraph 14(b) (when Bank Indonesia retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients) occurs, for example, if, Bank Indonesia has transferred government bonds to a third party in a situation where it retains the contractual right to receive interest on the government bonds, but has also assumed an obligation to pay the interest that is received to the third party. In that case, the financial assets qualify for derecognition if the conditions in paragraphs 15 and 16 are met. Evaluation of the Transfer of Risks and Rewards of Ownership PP30. Examples of when Bank Indonesia has transferred substantially all the risks and rewards of ownership are: (a) an unconditional sale of a financial asset; (b) a sale of a financial asset together with an option to repurchase the financial asset at its fair value at the time of repurchase; and (c) a sale of a financial asset together with a put or call option that is deeply out of the money so that it is highly unlikely to go into the money before expiry. PP31. Examples of when Bank Indonesia has retained substantially all the risks and rewards of ownership are: (a) a sale and repurchase transaction where the repurchase price is a fixed price or is equal to the sale price plus the lender‟s return; (b) a securities lending agreement; (c) a sale of financial assets together with a total return swap that transfers the market risk exposure back to Bank Indonesia; (d) a sale of a financial asset together with a deep in-the-money put or call option so that it is highly unlikely to go out of the money before expiry; and (e) a sale of short-term receivables in which Bank Indonesia guarantees to compensate the transferee for credit losses that are likely to occur. PP32. If Bank Indonesia determines that as a result of the transfer it has transferred substantially all the risks and rewards of ownership of the transferred asset, it does not recognise the transferred asset again in a future period, unless it reacquires the transferred asset based on a new 6.55 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
151. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 transaction. Evaluation of the Transfers of Control PP33. Bank Indonesia has not retained control of a transferred asset if the transferee has the practical ability to sell the transferred asset. Bank Indonesia has retained control of the transferred asset if the transferee does not have the practical ability to sell the transferred asset. A transferee has the practical ability to sell the transferred asset if the asset is traded in an active market because the transferee could repurchase transferred asset in the market if it needs to return the asset to Bank Indonesia. For example, a transferee may have the practical ability to sell a transferred asset if the asset is the subject of an option which allows Bank Indonesia to repurchase it, but the transferee can readily obtain the transferred asset in the market if the option is exercised. A transferee does not have the practical ability to sell the transferred asset if Bank Indonesia retains such an option and the transferee cannot readily obtain the transferred asset in the market if Bank Indonesia exercises its option. PP34. The transferee has the practical ability to sell the transferred asset only if the transferee can sell it in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer. The critical question is what the transferee is able to do in practice, not what contractual rights the transferee has concerning what it can do with the transferred asset or what contractual prohibitions exist. In particular: (a) a contractual right to dispose of the transferred asset has little practical effect if there is no market for the transferred asset; and (b) an ability to dispose of the transferred asset has little practical effect if it cannot be exercised freely. For that reason: (i) the transferee‟s ability to dispose of the transferred asset must be independent of the actions of others (i.e. it must be a unilateral ability); and (ii) the transferee must be able to dispose of the transferred asset without needing to attach restrictive conditions or „strings‟ to the transfer (e.g., conditions about how a loan asset is serviced or an option giving the transferee the right to repurchase the asset). PP35. That the transferee is unlikely to sell the transferred asset does not, of itself, mean that the transferor has retained control of the transferred asset. However, if a put option or guarantee constrains the transferee from selling the transferred asset, then the transferor has retained control of the transferred asset. For example, if a put option or guarantee is sufficiently valuable it constrains the transferee from selling the transferred asset 6.56 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
152. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 because the transferee would, in practice, not sell the transferred asset to a third party without attaching a similar option or other restrictive conditions. Instead, the transferee would hold the transferred asset so as to obtain payments under the guarantee or put option. Under these circumstances the transferor has retained control of the transferred asset. Transfers that Qualify for Derecognition PP36. Bank Indonesia may retain the right to a part of the interest payments on a transferred asset as compensation for servicing those assets. The part of interest payments that Bank Indonesia would give up upon termination or transfer of the servicing contract is allocated to the servicing asset or servicing liability. The part of the interest payments that Bank Indonesia would not give up is an interest-only strip receivable. For example, if Bank Indonesia would not give up any interest upon termination or transfer of the servicing contract, the entire interest spread is an interestonly strip receivable. For the purposes of applying paragraph 23, the fair values of the servicing assets and interest-only strip receivables are used to allocate the carrying amount of such receivables as between the part of the asset that is derecognised and the part that continue to be recognised. If there is no servicing fee specified or the fee to be received is not expected to compensate the entity adequately for performing the servicing, a liability for the servicing obligation is recognised at fair value. PP37. In estimating the fair value of the Part that continues to be recognised and the part that is derecognised for the purposes of applying paragraph 23, Bank Indonesia applies the fair value measurement requirements in paragraph PP94 and PKAK 07: Non-Unique Transactions, in addition to paragraph 24. Transfers that do not Qualify for Derecognition PP38. The following is an application of the principle outlined in paragraph 25. If a guarantee provided by Bank Indonesia for default losses on the transferred asset prevents a transferred asset from being derecognised because Bank Indonesia has retained substantially all the risks and rewards of ownership of the transferred asset, the transferred asset continues to be recognised in its entirety and the consideration received is recognised as a liability. Continuing Involvement in Transferred Assets PP39. The following are examples of how Bank Indonesia measures a transferred asset and the associated liabilities under paragraph 26. 6.57 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
153. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 All assets (a) If a guarantee provided by Bank Indonesia to pay for default losses on a transferred asset prevents the transferred asset from being derecognised to the extent of the continuing involvement, the transferred asset at the date of the transfer is measured at the lower of (i) the carrying amount of the asset, or (ii) the maximum amount of the consideration received in the transfer that Bank Indonesia could be required to repay („the guarantee amount‟). The associated liability is initially measured at guarantee amount plus the fair value of the guarantee (which is normally the consideration received for the guarantee). Subsequently, the initial fair value of the guarantee is recognised in the surplus deficit based on a time proportion basis (see PKAK 07: Non-Unique Transactions) and the carrying value of the asset is reduced by any impairment losses. Assets measured at amortised cost (b) If a put option obligation written by Bank Indonesia or call option right held by Bank Indonesia prevents a transferred asset from being derecognised and Bank Indonesia measures the transferred asset at amortised cost, the associated liability is measured at its cost (i.e. the consideration received) adjusted for the amortisation of any difference between that cost and the amortised cost of the transferred asset at the expiration date of the option. For example, assume that the amortised cost and the carrying amount of the asset on the date of transfer is Rp98 and that the consideration received Rp95. The amortised cost of the asset on the option exercise date is Rp100. The initial carrying amount of the associated liability is Rp95 and the difference between Rp95 and Rp100 is recognised in surplus deficit using the effective interest method. When the option is exercised, any difference between the carrying amount of the associated liability and the exercise price is recognised in the surplus deficit. Assets measured at fair value (c) If a call option right retained by Bank Indonesia prevents a transferred asset from being derecognised and Bank Indonesia measures the transferred asset at fair value, the asset continues to be measured at its fair value. The associated liability is measured at (i) the option exercise price less the time value of the option if the option is in or at the money, or (ii) the fair value of the transferred asset less the time value of the option if the option is out of the money. The adjustment made to the measurement of associated liability ensures that the net 6.58 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
154. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (d) (e) carrying amount of the asset and the associated liability the fair value of the call option right. For example, if the fair value of the underlying asset is Rp80, the option exercise price is Rp95, and the time value of the option is Rp5, the carrying amount of the associated liability is Rp75 (Rp80 - Rp5) and the carrying amount of the transferred asset is Rp80 (i.e., its fair value). if a put option issued by Bank Indonesia prevents a transferred asset from being derecognised and Bank Indonesia measures the transferred asset at fair value, the associated liability is measured at the option exercise price plus the time value of the option. The measurement of assets at fair value is limited to the lower of the fair value and the option exercise price because Bank Indonesia does not have the right to increase the fair value of the transferred asset above the exercise price of the option. This ensures that the net carrying amount of the asset and the associated liability is the fair value of the put option obligation. For example, if the fair value of the underlying asset is Rp120, the option exercise price is Rp100, and the time value of the option is Rp5, the carrying amount of the associated liability is Rp105 (Rp100 + Rp5) and the carrying amount of the asset is Rp100 (in this case the option exercise price). If a collar, in the form of a purchased call and written put, prevents a transferred asset from being derecognised and Bank Indonesia measures the asset at fair value, then Bank Indonesia continues to measure the asset at fair value. The associated liability is measured at (i) the sum of the call exercise price and fair value of the put option less the time value of the call option, if the call option is in or at the money, or (ii) the sum of the fair value of the assets and the fair value of the put option less the time value of the call option if the call option is out of the money. The adjustment to the associated liability ensures that the net carrying amount of the asset and the associated liability is the fair value of the option that is held and written by Bank Indonesia. For example, assume that Bank Indonesia transfers a financial asset that is measured at fair value while simultaneously purchasing a call with an exercise price of Rp120 option, and writing a put option with an exercise price of Rp80. Also assume that the fair value of the asset on the date of transfer is Rp100. The time value of the put option is Rp1 and the call option is Rp5. In this case, Bank Indonesia recognises an asset of Rp100 (the fair value of the asset) and a liability of Rp96 [(Rp100 + Rp1) - Rp5)]. This gives a net asset value of Rp4, which is the fair value of the options held and written by Bank Indonesia. 6.59 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
155. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 All Transfers PP40. To the extent that a transfer of a financial asset does not qualify for derecognition, the contractual rights and obligations of the transferor related to the transfer are not accounted for separately as derivatives if recognising both the derivative and either the transferred asset or the liability arising from the transfer would result in recognising the same rights or obligations twice. For example, a call option retained by the transferor may prevent the transfer of a financial asset from being accounted for as a sale. In such case, the call option is not separately recognised as a derivative asset. Example PP41. To the extent that a transfer of a financial asset does not qualify for derecognition, the transferee does not recognise the transferred asset as its asset. The transferee derecognises the cash or other amount paid, and recognises a receivable from the transferor. If the transferor has both a right and an obligation to reacquire control of the entire transferred asset for a fixed amount (such as under a repurchase agreement), the transferee may measures the receivable at amortised cost if it meets the criteria in paragraph 39. PP42. The following examples illustrate the application of the derecognition principles of this Statement. (a) Repurchase agreements and securities lending. If a financial asset is sold under an agreement to repurchase it at a fixed price or at the sale price plus a lender‟s return or if it is loaned under an agreement to return it to the transferor, it is not derecognised because the transferor retains substantially all the risks and rewards of ownership. If the transferee obtains the right to sell or pledge the asset, the transferor reclassifies the asset in the statement of financial position as, for example, a loaned asset or a repurchase receivable. (b) Repurchase agreements and securities lending—assets that are substantially the same. If a financial asset is sold under an agreement to repurchase the same or substantially the same asset at a fixed price or at the sale price plus a lender‟s return or if a financial asset is borrowed or loaned under an agreement to return the same or substantially the same asset to the transferor, it is not derecognised because the transferor retains substantially all the risks and rewards of ownership. (c) Repurchase agreements and securities lending—right of substitution. If a repurchase agreement at a fixed repurchase price or a price equal to the sale price plus a lender‟s return, or a similar securities lending transaction, provides the transferee with a right to substitute assets 6.60 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
156. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (d) (e) (f) (g) (h) (i) that are similar and of equal fair value to the transferred asset at the repurchase date, the asset sold or lent under a repurchase or securities lending transaction is not derecognised because the transferor retains substantially all the risks and rewards of ownership. Repurchase right of first refusal at fair value. If Bank Indonesia sells a financial asset and retains only a right of first refusal to repurchase the transferred asset at fair value if the transferee subsequently sells the asset, Bank Indonesia derecognises the asset because it has transferred substantially all of the risks and rewards of ownership. Wash sale transactions. The repurchase of a financial asset shortly after it has been sold is sometimes referred to as a wash sale. Such a repurchase does not preclude derecognition provided that the original transaction met the derecognition requirements. However, if an agreement to sell a financial asset is entered into concurrently with an agreement to repurchase the same asset at a fixed price or the sale price plus a lender‟s return, then the asset is not derecognised. Put options and call options that are deeply in the money. If a transferred financial asset can be called back by the transferor and the call option is deeply in the money, the transfer does not qualify for derecognition because the transferor has retained substantially all the risks and rewards of ownership. Similarly, if the financial asset can be put back by the transferee and the put option is deeply in the money, the transfer does not qualify for derecognition because the transferor has retained substantially all the risks and rewards of ownership. Put options and call options that are deeply out of the money. A financial asset that is transferred subject only to a deep out-of-the-money put option held by the transferee or a deep out-of-the-money call option held by the transferor is derecognised. This is because the transferor has transferred substantially all of the risks and rewards of ownership. Readily obtainable assets subject to a call option that is neither deeply in the money nor deeply out of the money. If Bank Indonesia holds a call option on an asset that is readily obtainable in the market and the option is neither deeply in the money nor deeply out of the money, the asset is derecognised. This is because Bank Indonesia (i) has neither retained nor transferred substantially all the risks and rewards of ownership, and (ii) has not retained control. However, if the asset is not readily obtainable in the market, derecognition is precluded to the extent of the amount of the asset that is subject to the call option because Bank Indonesia has retained control of the asset. A not readily obtainable asset subject to a put option written by an entity that is neither deeply in the money nor deeply out of the money. If Bank Indonesia transfers a financial asset that is not readily obtainable in the market, and writes a put option that is not deeply out of the money, Bank Indonesia neither retains nor transfers 6.61 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
157. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (j) (k) (l) (m) substantially all the risks and rewards of ownership because of the written put option. The entity retains control of the asset if the put option is sufficiently valuable to prevent the transferee from selling the asset, in which case the asset continues to be recognised to the extent of the transferor‟s continuing involvement (see paragraph PP35). Bank Indonesia transfers control of the transferred asset if the put option is not sufficiently valuable to prevent the transferee from selling the asset, in which case the asset is derecognised. Assets subject to a fair value put or call option or a forward repurchase agreement. A transfer of a financial asset that is subject only to a put or call option or a forward repurchase agreement that has an exercise or repurchase price equal to the fair value of the financial asset at the time of repurchase results in derecognition because of the transfer of substantially all the risks and rewards of ownership. Cash-settled call or put options. Bank Indonesia evaluates the transfer of a financial asset that is subject to a put or call option or a forward repurchase agreement that will be settled net in cash to determine whether it has retained or transferred substantially all the risks and rewards of ownership. If Bank Indonesia has not retained substantially all the risks and rewards of ownership of the transferred asset, it determines whether it has retained control of the transferred asset. That the put or the call or a forward repurchase agreement that is settled net in cash does not automatically mean that Bank Indonesia has transferred control (see paragraphs PP35 and (g), (h) and (i) above). Removal of accounts provision. A removal of accounts provision is an unconditional repurchase (call) option that gives Bank Indonesia the right to reclaim assets transferred subject to some restrictions. Provided that such an option results in the entity neither retaining nor transferring substantially all the risks and rewards of ownership, it precludes derecognition only to the extent of the amount subject to repurchase (assuming that the transferee cannot sell the assets). For example, if the carrying amount and the proceeds from the transfer of loan assets are Rp100,000 and any individual loan could be called back but the aggregate amount of loans that could be repurchased could not exceed Rp10,000, Rp90,000 of the loans would qualify for derecognition. Clean-up calls. Bank Indonesia, which may be a transferor, that services transferred assets may hold a clean up call to purchase the remaining transferred assets when the value of the outstanding assets falls to a specified level at which the cost of servicing those assets becomes burdensome in relation to the benefits of servicing. Provided that such a clean-up call results in Bank Indonesia neither retaining nor transferring substantially all the risks and rewards of ownership and the transferee cannot sell the assets, it precludes derecognition 6.62 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
158. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (n) (o) (p) (q) only to the extent of the amount of the assets that is subject to the call option. Subordinated retained interest and credit guarantees. Bank Indonesia may provide the transferee with credit enhancement by subordinating some or all of its interest retained in the transferred asset. Alternatively, Bank Indonesia may provide the transferee with credit enhancement in the form of a credit guarantee that could be unlimited or limited to a specified amount. If Bank Indonesia retains substantially all the risks and rewards of ownership of the transferred asset, the asset continues to be recognised in its entirety. If Bank Indonesia retains some, but not substantially all, of the risks and rewards of ownership and has retained control, derecognition is precluded to the extent of the amount of cash or other assets that Bank Indonesia could be required to pay. Total return swaps. Bank Indonesia may sell a financial asset to a transferee and enter into a total return swap with the transferee, whereby all of the interest payment cash flows from the underlying assets are remitted to Bank Indonesia in exchange for a fixed payment or variable rate payment and any increases or declines in the fair value of the underlying asset are absorbed by Bank Indonesia. In such case, derecognition of all of the asset is prohibited. Interest rate swaps. Bank Indonesia may transfer to a transferee a fixed rate financial asset and enter into an interest rate swap with the transferee to receive a fixed interest rate and pay a variable interest rate based on a notional amount that is equal to the principal amount of the transferred financial asset. The interest rate swap does not preclude derecognition of the transferred asset provided the payments on the swap are not conditional on payments being made on the transferred asset. Amortising interest rate swaps. Bank Indonesia may transfer to a transferee a fixed rate financial asset that is paid off over time, and enter into an amortising interest rate swap with the transferee to receive a fixed interest rate and pay a variable interest rate based on a notional amount. If the notional amount of the swap amortises so that it equals the principal amount of the transferred financial asset outstanding at any point in time, the swap would generally result in the entity retaining substantial prepayment risk, in which case Bank Indonesia either continues to recognise all of the transferred asset or continues to recognise the transferred asset to the extent of its continuing involvement. Conversely, if the amortisation of the notional amount of the swap is not linked to the principal amount outstanding of the transferred asset, such a swap would not result in Bank Indonesia retaining prepayment risk on the asset. Hence, it would not preclude derecognition of the transferred asset provided the payments 6.63 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
159. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 on the swap are not conditional on interest payments being made on the transferred asset and the swap does not result in Bank Indonesia retaining any other significant risks and rewards of ownership on the transferred asset. PP43. This paragraph illustrates the application of the continuing involvement approach when Bank Indonesia‟s continuing involvement is in a part of a financial asset. Assume Bank Indonesia has a portfolio of prepayable loans whose coupon and effective interest rate is 10% and whose principal amount and amortised cost is Rp10,000. It enters into a transaction in which, in return for a payment of Rp9,115, the transferee obtains the right to Rp9,000 of any collections of principal plus interest thereon at 9.5%. The entity retains rights to Rp1,000 of any collections of principal plus interest thereon at 10%, plus the excess spread of 0.5% on the remaining Rp9,000 of principal. Collections from prepayments are allocated between Bank Indonesia and the transferee proportionately in the ratio of 1:9, but any defaults are deducted from the entity‟s interest of Rp1,000 until that interest is exhausted. The fair value of the loans at the date of the transaction is Rp10,100 and the fair value of the excess spread of 0.5% is Rp40. Bank Indonesia determines that it has transferred some significant risks and rewards of ownership (for example, significant prepayment risk) but has also retained some significant risks and rewards of ownership (because of its subordinated retained interest) and has retained control. It therefore applies the continuing involvement approach. In applying this Statement, Bank Indonesia analyses the transaction as (a) the retention of a fully proportionate retained interest of Rp1,000 plus (b) the subordination of that retained interest to provide credit enhancement to the transferee for credit losses. Bank Indonesia calculates that Rp9,090 (90% x Rp10,100) of the consideration received of Rp9,115 represents the consideration for a fully proportionate
90 % share. The remainder of the consideration received (Rp 25) represents consideration received for subordinating its retained interest to provide credit enhancement to the transferee for credit losses. In addition, the excess spread of 0.5 % represents consideration received for the credit enhancement. Accordingly, the total consideration received for the credit enhancement isRp65 (Rp40 + Rp25). Bank Indonesia then calculates its gain or loss on the sale of 90% of the 6.64 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
160. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------- cash flow. Assuming that the separate fair values for the 90% part transferred and the 10% part retained are not available on the date of the transfer, Bank Indonesia allocates the carrying amounts of the asset in accordance with paragraph 24 as follows: Portion transferred Portion retained Total Estimated fair Percentage value 9,090 90% Allocated carrying value 9,000 1,010 10% 1,000 10,100 100% 10,000 Bank Indonesia computes its gain or loss on the sale of 90% share of the cash flow by deducting the carrying amount of the portion transferred from the consideration received Rp90 (Rp9,090-Rp9,000). The carrying amount of the portion retained by Bank Indonesia is Rp1,000. In addition, Bank Indonesia recognises its continuing involvement: that results from the subordination of its retained interest for credit losses. Accordingly, it recognises an asset of Rp 1,000 (the maximum amount of the cash flows it would not receive under the subordination), and an associated liability of Rp 1,065 (which is the maximum amount of the cash flows it would not receive under the subordination, i.e. Rp1,000 plus the fair value of the subordination, that is,Rp65 ). Bank Indonesia uses all of the above information to record the transaction as follows: Debit Original asset Asset recognised for subordination or 1,000 the residual interest Asset for the consideration received 40 in the form of excess spread Profit or loss (gain on transfer) Liability Cash received 9,155 Total 10,155 Credit 9.000 90 9,065 10,155 Immediately following the transaction, the carrying amount of the asset is Rp2,040 comprising Rp1,000, representing the allocated cost of the portion retained, and Rp1,040, representing the entity‟s additional continuing involvement from the subordination of its retained interest for credit losses (which includes the excess spread of Rp40). 6.65 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
161. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------- In subsequent periods, Bank Indonesia recognises the consideration received for the credit enhancement (Rp65) on a time proportion basis, accrues interest on the recognised asset using the effective interest method, and recognises any credit impairments on the recognised asset. As an example of the latter, assume that in the following year there is a credit impairment loss on the underlying loans of Rp300. The Bank Indonesia reduces its recognised asset by Rp600 (Rp300 relating to its retained interest and Rp300 relating to the additional continuing involvement that arises from the subordination of its retained interest for credit losses), and reduces its recognised liability by Rp300. The net result is a charge to surplus deficit for credit impairment of Rp300. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Derecognition of a Financial Liability (a) (b) PP44. A financial liability (or part of it) expires if Bank Indonesia: discharges the liability (or part of it) by paying the counterparty; or is legally released from the primary responsibility for the liability (or part of it) either by process of law or by the creditor. (If Bank Indonesia has given a guarantee this condition may still be met). PP45. If an issuer of a debt instrument repurchases the instrument, then the debt extinguished even if the issuer is a market maker in that instrument or intends to resell it in the near term. PP46. Payment to a third party, including a trust (sometimes called „insubstance defeasance‟), does not, by itself, relieve Bank Indonesia of its primary obligation to the creditor, in the absence of legal release. PP47. If Bank Indonesia pays a third party assume an obligation and notifies its creditor that the third party has assumed its debt obligation, Bank Indonesia does not derecognise the debt obligation unless the condition in paragraph PP44(b)is met. If Bank Indonesia pays a third party to assume an obligation and obtains a legal release from its creditor, Bank Indonesia has extinguished the debt. However, if Bank Indonesia agrees to make payments on the debt to the third party or direct to its original creditor, Bank Indonesia recognises a new debt obligation to the third party. PP48. Although legal release, whether judicially or by the creditor, results in derecognition of a liability, Bank Indonesia may recognise a new liability if the derecognition criteria in paragraphs 12-33 are not met for the financial assets transferred. If those criteria are not met, the transferred assets are not 6.66 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
162. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 derecognised, and Bank Indonesia recognises a new liability relating to the transferred assets. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 PP49. For the purpose of paragraph 35, the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability. PP50. In some cases, a creditor releases Bank Indonesia from its present obligation to make payments, but Bank Indonesia assumes a guarantee obligation to pay if the party assuming primary responsibility defaults. In these circumstances, Bank Indonesia: (a) recognises a new financial liability based on the fair value of the obligation for the guarantee; and (b) recognises a gain or loss based on the difference between (i) any proceeds paid and (ii) the carrying amount of the original financial liability less the fair value of the new financial liability. CLASSIFICATION (paragraphs 38-53) Classification of Financial Assets Bank Indonesia‟s Business Model for Managing Financial Assets PP51. Paragraph 38(a) requires Bank Indonesia to classify financial assets as subsequently measured at amortised cost or fair value on the basis of Bank Indonesia‟s business model for managing financial assets. Bank Indonesia assesses whether its financial assets satisfy the two conditions set out in paragraph 38 based on the objectives of its business model, as determined by the Board of Governors of Bank Indonesia. PP52. The Bank Indonesia‟s business model does not depend on management‟s intentions for an individual instrument. Accordingly, this condition is not an instrument-by-instrument approach to classification and should be determined on a higher level of aggregation. However, Bank Indonesia may have more than one business model for managing its financial instruments. Therefore, classification need not be determined at the 6.67 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
163. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 reporting entity level. For example, Bank Indonesia may have a portfolio of financial assets that it manages for the purpose of obtaining contractual cash flows, while another financial asset portfolio is managed for trading purposes in connection with policy implementation. PP53. Although the objective of Bank Indonesia‟s business model may be to hold financial assets in order to collect contractual cash flows, the Bank Indonesia need not hold all of those instruments until maturity. Thus an entity‟s business model can be to hold financial assets to collect contractual cash flows even when sales of financial assets occur. For example, Bank Indonesia may sell financial assets if: (a) the financial asset no longer meets Bank Indonesia‟s policy (e.g., the credit rating of the asset declines below the limit required by policy or an event of breach of contract by an issuer occurs); or (b) Bank Indonesia requires funds for policy implementation in the context of a crisis management protocol. However, if more than an infrequent number of sales are made out of a portfolio, Bank Indonesia needs to assess whether and how such sales are consistent with an objective of collecting contractual cash flows. PP54. The following are some examples of when the objective of Bank Indonesia‟s business model may be to hold financial assets to collect the contractual cash flows: Example Example 1 Bank Indonesia holds financial assets with the objective to collect their contractual cash flows but would sell a financial asset in particular circumstances. Example 2 Bank Indonesia‟s business model is to purchase portfolios of financial assets, such as loans. These portfolios may or may not include financial assets with incurred credit losses. If payment on the loans is not made on a timely basis, Bank Analysis Although Bank Indonesia may consider, among other information, the fair value of financial assets from the perspective of liquidity (i.e., the amount of cash that would be realised if Bank Indonesia needs to sell the assets), Bank Indonesia‟s objective is to hold financial assets and collect contractual cash flows. Some sales would not contradict that objective. The objective of Bank Indonesia‟s business model is to hold financial assets and collect contractual cash flows. Bank Indonesia does not purchase the portfolio for the purpose of making a profit by selling them. 6.68 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
164. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------- Example Indonesia attempts to extract the contractual cash flows through various means—for example, by making contact with the debtor by mail, telephone or other methods. In some cases, Bank Indonesia enters into interest rate swaps to change the interest rate on particular financial assets in a portfolio from a floating interest rate to a fixed interest rate. Analysis The same analysis would apply even though Bank Indonesia does not expect to receive all of the contractual cash flows (for example, some of the financial assets have incurred credit losses). In addition, the fact that Bank Indonesia has entered into derivatives to modify the cash flows of the portfolio does not in itself change Bank Indonesia‟s business model. If a portfolio is not managed on a fair value basis, the objective of the business model could be to hold the assets to collect the contractual cash flows 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 PP55. One business model in which the objective is not to hold instruments to collect the contractual cash flows is when Bank Indonesia manages a portfolio of financial assets to be traded for policy implementation purposes. For example, Bank Indonesia actively manages a portfolio of financial assets for policy implementation, where Bank Indonesia can sell the portfolio for the purpose of absorption. This objective of Bank Indonesia results in sales of securities or agreements for the sale of securities based on promises to repurchase by third parties, with trading conducted actively in order to manage liquidity in the economy rather than to obtain contractual cash flows. PP56. A portfolio of financial assets that is managed and whose performance is evaluated on a fair value basis (as described in paragraph 44(b)) is not held to collect contractual cash flows. Also, a portfolio of financial assets that meets the definition of held for sale is not held to collect contractual cash flows. Such portfolios of instruments must be measured at fair value through revaluation reserves. Contractual Cash Flow that are Solely Payments of Principal and Interest on the Principal Amount Outstanding PP57. Paragraph 38 requires Bank Indonesia (unless paragraph 42 applies) to classify a financial asset as subsequently measured at amortised 6.69 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
165. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 cost or fair value through revaluation reserves on the basis of the contractual cash flow characteristics of the financial assets classified as managed to obtain contractual cash flows. PP58. Bank Indonesia shall assess whether contractual cash flows are solely payments of principal and interest on the principal amount outstanding for the currency in which the financial asset is denominated (see PKAK 03: Effects of Changes in Foreign Exchange Rates). PP59. Leverage is a contractual cash flow characteristic of some financial assets. Leverage increases the variability of the contractual cash flows with the result that they do not have the economic characteristics of interest. Stand-alone option contracts, forward contracts, and swap contracts are examples of financial assets that include leverage. Thus, such contracts do not meet the requirements set out in paragraph 39(b) and cannot be subsequently measured at amortised cost. PP60. Contractual provisions that permit the issuer (i.e., the debtor) to prepay a debt instrument (e.g., a loan or a bond) or permit the holder (i.e., the creditor) to put a debt instrument back to the issuer before maturity result in contractual cash flows that are solely payments of principal and interest on the principal amount outstanding only if: (a) the provision is not contingent on future events, other than to protect: (i) the holder against the credit deterioration of the issuer (e.g., defaults, credit downgrades or loan covenant violations), or a change in control of the issuer; or (ii) the holder or issuer against changes in relevant taxation or law; and (b) the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for the early termination of the contract. PP61. Contractual provisions that permit the issuer or holder to extend the term of the contractual term of a debt instrument (i.e., an extension option) result in contractual cash flows that are solely payments of principal and interest on the principal amount outstanding only if: (a) the provision is not contingent on future events, other than to protect: (i) the holder against the credit deterioration of the issuer (e.g., defaults, credit downgrades or loan covenant violations), or a change in control of the issuer; or (ii) the holder or issuer against changes in relevant taxation or law; and 6.70 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
166. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 (b) the terms of the extension option result in contractual cash flows during the extension period that are solely payments of principal and interest on the principal amount outstanding. PP62. A contractual term that changes the timing or amount of payments of principal or interest does not result in contractual cash flows that are solely principal and interest on the principal amount outstanding unless it: (a) is a variable interest rate that is consideration for the time value of money and the credit risk (which may be determined at initial recognition only, and so may be fixed) associated with the principal amount outstanding; and (b) if the contractual term is a prepayment option, meets the conditions in paragraph PP60; or (c) if the contractual term is an extension option, meets the conditions in paragraph PP61. PP63. The following examples illustrate contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. Instrument Instrument A Instrument A is a bond with a stated maturity date. Payments of principal and interest on outstanding principal are linked to an inflation index of the currency in which the instrument is issued. The inflation link is not leveraged and the principal is protected. Analysis The contractual cash flows are solely payments of principal and interest on the principal amount outstanding. Linking payments of principal and interest on the principal amount outstanding to an unleveraged inflation index resets the time value of money to a current level. In other words, the interest rate of the instrument reflects „real‟ interest. Thus, the interest amounts are consideration for the time value of money on the principal amount outstanding. However, if the interest payments were indexed to another variable such as the debtor‟s performance (e.g., the debtor‟s net income) or an equity index, the contractual cash flows are not payments of principal and interest on the principal amount outstanding. That is 6.71 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
167. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------- because the interest payments are not consideration for the time value of money and for credit risk associated with the principal amount outstanding. There is variability in the contractual interest payments that is inconsistent with market interest rates. Instrument B Instrument B is a variable interest rate instrument with a stated maturity date that permits the borrower to choose the market interest rate on an ongoing basis. For example, at each interest rate reset date, the borrower can choose to pay three-month JIBOR for a three-month term or one-month JIBOR for a one-month term. The contractual cash flows are solely payments of principal and interest on the principal amount outstanding as long as the interest paid over the life of the instrument reflects consideration for the time value of money and for the credit risk associated with the instrument. The fact that the JIBOR interest rate is reset during the life of the instrument does not in itself disqualify the instrument. However, if the borrower is able to choose to pay one-month LIBOR for three months and that one-month JIBOR is not reset each month, the contractual cash flows are not payments of principal and interest. The same analysis would apply if the borrower is able to choose between the lender‟s published onemonth variable interest rate and the lender‟s published three-month variable interest rate. However, if the instrument has a contractual interest rate that is based on a term that exceeds the remaining life of the instrument, its contractual cash flows are not payments of principal and interest on the principal amount 6.72 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
168. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------- outstanding. For example, a constant maturity bond with a fiveyear term that pays a variable rate that is reset periodically but always reflects a five-year maturity does not result in contractual cash flows that are payments of principal and interest on the principal amount outstanding. This is because the interest payable in each period is disconnected from the term of the instrument (except at origination). Instrument C Instrument C is a bond with a stated The contractual cash flows for the maturity date that pays a variable following two instruments: market interest rate. The variable a. an instrument that has a fixed interest rate is capped. interest rate and b. an instrument that has a variable interest rate are payments of principal and interest on the principal amount outstanding as long as the interest reflects consideration for the time value of money and for the credit risk associated with the instrument during the term of the instrument. Thus, an instrument that is a combination of (a) and (b) (for example, a bond with an interest rate cap) can have a cash flow that are solely payments of principal and Instrument D Instrument D is a full recourse loan The fact that a full-recourse loan is and is secured by collateral. backed by collateral does not in itself affect the analysis of whether the contractual cash flows are solely payments of principal and interest on the principal amount outstanding. 6.73 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
169. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 PP64. The following examples illustrate contractual cash flows that are not payments of principal and interest on the principal amount outstanding: Instrument Instrument E Instrument E is a loan that pays an inverse floating interest rate (that is, an interest rate that has an inverse relationship with market interest rates. Analysis The contractual cash flows are not solely payments of principal and interest on the principal amount outstanding. The interest amounts are not consideration for the time value of money on the principal amount outstanding. Instrument F Instrument F is a perpetual instrument but the issuer may call the instrument at any point and pay the holder the par amount plus accrued interest due. Instrument F pays a market interest rate but interest payments cannot be made unless the issuer of the instrument remains solvent. Deferred interest does additional interest. not accrue The contractual cash flows are not payments of principal and interest on the principal amount outstanding. This is because the issuer may be required to defer interest payments and additional interest does not accrue on the deferred interest amount. As a result, interest amounts are not consideration for the time value of money on the principal amount outstanding. If interest accrued on the deferred amounts, the contractual cash flows could be payments of principal and interest on the principal amount outstanding. The fact that instrument F is perpetual in nature does not in itself mean that the contractual cash flows are not payments of principal and interest on the principal amount outstanding. In effect, a perpetual instrument has continuous (multiple) extension options. Such options may result in 6.74 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
170. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------- contractual cash flows that are payments of principal and interest on the principal amount outstanding if interest payments are mandatory and must be paid in perpetuity. Similarly, the fact that instrument F is callable does not mean that the contractual cash flows are not payments of principal and interest on the principal amount outstanding unless it is callable at an amount that does not substantially reflect the payment of outstanding principal and interest on that principal. Even if the callable amount includes an amount to compensate the holder the early termination of the instrument, the contractual cash flows could be payments of principal and interest on the principal amount outstanding. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 PP65. In some cases, a financial asset may have contractual cash flows that are described as principal and interest, but those cash flows do not reflect the payment of principal and interest on the principal amount outstanding, as described in paragraphs 39(b) and 40 of this Statement. PP66. This may be the case if the financial asset represents an investment in particular assets or cash flows and hence the contractual cash flows are not solely payments of principal and interest on the principal amount outstanding. For example, the contractual cash flows may include payments for factors other than consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time. As a result, the instrument would not satisfy the condition in paragraph 39(b). This could be the case when a creditor‟s claim is limited to specified assets of the debtor or the cash flows from specified assets (for example, a „non-recourse‟ financial asset). 6.75 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
171. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 PP67. Nonetheless, the fact that a financial asset is non-recourse does not itself necessarily preclude the financial asset from meeting the condition in paragraph 39(b). In such situations, the creditor is required to assess („look through to‟) the particular underlying assets or cash flows to determine whether the contractual cash flows of the financial asset being classified are payments of principal and interest on the principal amount outstanding. If the terms of the financial asset give rise to any other cash flows or limit the cash flows in a manner inconsistent with payments representing principal and interest, the financial asset does not meet the condition in paragraph 39(b). Whether the underlying assets are financial assets or non-financial assets does not in itself affect this assessment. PP68. If a contractual cash flow characteristic is not genuine, it does not affect the classification of a financial asset. A cash flow characteristic is not genuine if it affects the instrument‟s contractual cash flows only on the occurrence of an event that is extremely rare, highly abnormal and very unlikely to occur. PP69. In almost every lending transaction the creditor‟s instrument is ranked relative to the instruments of the debtor‟s other creditors. An instrument that is subordinated to other instruments may have contractual cash flows that are payments of principal and interest on the principal amount outstanding if the debtor‟s non-payment is a breach of contract and the holder has a contractual right to unpaid amounts of principal and interest on the principal amount outstanding even in the event of the debtor‟s bankruptcy. For example, a trade receivable that ranks its creditor as a general creditor would qualify as having payments of principal and interest on the principal amount outstanding. This is the case even if the debtor issued loans that are collateralized, which in the event of bankruptcy would give that loan holder priority over the claims of the general creditor in respect of the collateral but does not affect the contractual right of the general creditor to unpaid principal and other amounts due. Instruments that Contractually Linked with Specific Variables PP70. In some types of transactions, Bank Indonesia can prioritize payments to holders of financial assets using multiple contractually linked instruments with certain variables that create concentrations of credit risk (tranches). Each tranche has a subordination ranking that specifies the order in which any cash flows generated by the issuer are allocated to the tranche. In such situations, the holders of a tranche have the right to payments of principal and interest on principal amount outstanding only if the issuer generates sufficient cash flow to satisfy higher-ranking tranches. 6.76 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
172. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 PP71. In such transactions, a tranche has cash flow characteristics that are payments of principal and interest on principal amount outstanding only if: (a) the contractual terms of the tranche being assessed for classification (without looking through to the underlying pool of financial instruments)give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (e.g., the interest rate on a tranche is not linked to a commodity index); (b) the underlying pool of financial instruments have cash-flow characteristics, as described in paragraphs PP73 and PP74; and (c) the exposure to the credit risk of the underlying pool of financial assets that are inherent in the tranche is equal to or lower than exposure to the credit risk of the underlying pool of financial instruments (for example, this condition would be met if the underlying pool of instruments were to lose 50% as a result of credit losses and under all circumstances the tranche would lose 50% or less). PP72. Bank Indonesia must look through until it can identify the underlying pool of instruments that are creating (rather than passing through) the cash flows. This is the underlying pool of financial instruments. PP73. The underlying pool must contain one or more instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. PP74. The underlying pool of instruments may also include instruments that: (a) reduce the cash flow variability of the instruments referred to in paragraph PP73 and, when combined with the instruments in paragraph PP73, result in cash flows that are solely payments of principal and interest on the principal amount outstanding (for example, an interest rate cap or interest rate floor or a contract that reduces credit risk on some or all of the instruments referred to in paragraph PP73); or (b) align the cash flows of the tranches with the cash flows from the pool of underlying instruments referred to in paragraph PP73 so as to address differences in and only in: (i) whether the interest rate is fixed or floating); (ii) the currency in which the cash flows are denominated, including inflation in that currency; or (iii) the timing of the cash flows. 6.77 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
173. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 PP75. If any instrument in the pool does not meet the conditions in either paragraphs PP73 or PP74, then the condition of in paragraph PP71(b) is not met. PP76. If the holder cannot assess the conditions set out in paragraph PP71 at initial recognition, the tranche must be measured at fair value through revaluation reserves. If the underlying pool of instruments can change after initial recognition in such a way that the pool may not meet the conditions set out in paragraphs PP73 and PP74, then the tranche does not meet the conditions in paragraph PP71 and must be measured at fair value through the revaluation reserves. Options to Designate Financial Assets or Financial Liabilities at Fair Value through the Revaluation Reserves PP77. Subject to the conditions in paragraphs 42 and 44, this Statement allows Bank Indonesia to designate a financial asset, financial liability, or a group of financial instruments (financial assets, financial liabilities or both) as at fair value through the revaluation reserves provided that doing so results in more relevant information. PP78. The decision of Bank Indonesia to designate a financial asset or financial liability to be measured at fair value through the revaluation reserves is similar to a choice of accounting policy (although, unlike a choice of accounting policy, it is not required to be applied consistently to all similar transactions). When Bank Indonesia has such a choice, PKAK 01: Accounting Policies requires the chosen policy to result in the financial statements providing reliable and more relevant information. For example, in the case of the designation of a financial liability to be measured at fair value through the revaluation reserves, paragraph 44 sets out the two circumstances when the requirement for more relevant information will be met. Accordingly, to choose such designation in accordance with paragraph 44, Bank Indonesia needs to demonstrate that it falls within one (or both) of these two circumstances. Designation Mismatch Eliminates or Significantly Reduces an Accounting PP79. Measurement of a financial asset or financial liability and classification of recognised changes in its value are determined by the classification of the item and whether or not the item is part of a designated hedging relationship. These requirements can create a measurement or recognition inconsistency (sometimes referred to as an „accounting mismatch‟) when, for example, in the absence of designation as at fair value 6.78 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
174. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 through the revaluation reserves, a financial asset would be classified as subsequently measured at fair value and a liability the entity considers related would be subsequently measured at amortised cost (with changes in fair value not being recognised). In such circumstances, Bank Indonesia may conclude that the financial statements would provide more relevant information if both the asset and the liability were measured as at fair value through the revaluation reserves. PP80. The following examples show when such condition could be met. In all cases, Bank Indonesia may use this condition to designate financial assets or financial liabilities as at fair value through the revaluation reserves if it meets the principle in paragraphs 42 or 44(a). (a) Bank Indonesia has financial assets, financial liabilities or both that share a risk, such as an interest rate risk, that gives rise to opposite changes in fair value that tend to offset each other. However, only some of the instruments would be measured at fair value through the revaluation reserves (i.e., are derivatives or are classified as held for sale). It may also be the case in a situation where the requirements for hedge accounting are not met, for example, because the effectiveness requirements in paragraph 105 are not met. (b) Bank Indonesia has non-derivative financial assets and liabilities that share a risk, such as interest rate risk, that gives rise to opposite changes in fair value that tend to offset each other and Bank Indonesia does not qualify for hedge accounting because none of the instruments is a derivative. Furthermore, in the absence of hedge accounting there is a significant inconsistency in the recognition of gains and losses. For example, Bank Indonesia has financed a certain group of financial assets held for sale by issuing financial liabilities measured at amortised cost, where changes in fair value tend to offset each other. Moreover, if Bank Indonesia regularly buys and sells the financial assets, but rarely, if ever, buys or sells the financial liabilities, the reporting of financial assets and financial liabilities at fair value through the revaluation reserves eliminates the inconsistency in the timing of recognition of gains and losses that would otherwise result from measuring them both at amortised cost and recognising a gain or loss each time a financial asset is repurchased. PP81. In cases such as those described in the preceding paragraph, to designate, at initial recognition, the financial assets and financial liabilities not otherwise so measured as at fair value through revaluation reserves may eliminate or significantly reduce the measurement or recognition inconsistency and produce more relevant information. For practical purposes, Bank Indonesia need not enter into all of the assets and liabilities giving rise to the measurement or recognition inconsistency at exactly the 6.79 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
175. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 same time. A reasonable delay is permitted provided that each transaction is designated as at fair value through revaluation reserves at its initial recognition and, at that time, any remaining transactions are expected to occur. PP82. It would not be acceptable to designate only some of the financial assets and financial liabilities giving rise to the inconsistency as at fair value through revaluation reserves if to do so would not eliminate or significantly reduce the inconsistency and would therefore not result in more relevant information. However, it would be acceptable to designate only some of a number of similar financial assets or similar financial liabilities if doing so achieves a significant reduction (and possibly a greater reduction than other allowable designations) in the inconsistency. For example, assume that Bank Indonesia has a number of similar financial liabilities that sum to Rp100 and a number of similar financial assets that sum to Rp50, but are measured using a different basis. Bank Indonesia may significantly reduce the measurement inconsistency by designating at initial recognition all of the assets but only some of the liabilities (for example, individual liabilities with a combined total of Rp45) as at fair value through revaluation reserves. However, because designation as at fair value through revaluation reserves can be applied only to the whole of a financial instrument, Bank Indonesia in this example must designate one or more liabilities in their entirety. Bank Indonesia could not designate either a component of a liability (e.g., changes in value attributable to only one risk, such as changes in a benchmark interest rate) or a proportion (i.e., percentage) of a liability. A Group of Financial Liabilities or Financial Assets and Financial Liabilities is Managed and Its Performance is Evaluated on a Fair Value Basis PP83. Bank Indonesia may manage and evaluate the performance of a group of financial liabilities or financial assets and financial liabilities in such a way that measuring that group at fair value through the revaluation reserves results in more relevant information. The focus in this instance is on the way Bank Indonesia manages and evaluates performance, rather than on the nature of the financial instruments. PP84. For example, Bank Indonesia may use this condition to designate financial liabilities as at fair value through the revaluation reserves only if the principle set out in paragraph 44(b) is satisfied and Bank Indonesia has financial assets and financial liabilities that share one or more risks and those risks are managed and evaluated on a fair value basis in accordance with the documented policies of asset and liability management. An example could be Bank Indonesia that has issued „structured products‟ containing 6.80 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
176. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 multiple embedded derivatives and manages the resulting risks on a fair value using a mix of derivative and non-derivative financial instruments. PP85. As noted above, this condition relies on the way Bank Indonesia manages and evaluates the performance of a group of financial instruments under consideration. Accordingly, (subject to the requirement of designation at initial recognition) Bank Indonesia that designates financial liabilities as at fair value through revaluation reserves on the basis of this condition shall so designate all eligible financial liabilities that are managed and evaluated together. PP86. Documentation of Bank Indonesia‟s strategy need not be extensive but should be sufficient to demonstrate compliance with paragraph 44(b). Such documentation is not required for each individual item, but may be on a portfolio basis. For example, if the performance management system for a department, as approved by the Board of Governor of Bank Indonesia, clearly demonstrates that the department's performance is evaluated on a total return basis, then no further documentation is required to demonstrate compliance with paragraph 44(b). Embedded Derivatives PP87. When Bank Indonesia becomes a party to a hybrid contract with a host that is not an asset within the scope of this Statement. Paragraph 47 requires Bank Indonesia to identify any embedded derivative, assess whether it is required to be separated from the host contract, and, for those that are required to be separated, measure the derivatives at fair value at initial recognition and subsequently. PP88. An embedded non-option derivative (such as an embedded forward or swap) is separated from its host contract on the basis of its stated or implied substantive terms, so as to result in it having a fair value of zero at initial recognition. An embedded option-based derivative (such as an embedded put, call, cap, floor or swaption) is separated from the host contract based on the explicit requirements of the option feature. The initial carrying amount of the host instrument is the residual amount after separating the embedded derivative. PP89. Generally, multiple embedded derivatives in a single hybrid contract are treated as a single compound embedded derivative. However, if the contract has more than one embedded derivative and those derivatives relate to different risk exposures and are readily separable and independent of each other, they are accounted for separately from each other. 6.81 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
177. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 PP90. The economic characteristics and risks of an embedded derivative are not closely related to the host contract (paragraph 47(a)) in the following examples. In these examples, assuming the conditions in paragraph 47(b) and (c) are met, Bank Indonesia accounts for the embedded derivative from the host contract. (a) A put option embedded in an instrument that enables the holder to require the issuer to reacquire the instrument for an amount of cash or with another financial asset whose value varies on the basis of the change in an equity or commodity price or index is not closely related to a host debt instrument. (b) An option or automatic provision to extend the remaining term to maturity of a debt instrument is not closely related to the host debt instrument, unless there is a concurrent adjustment to the approximate current market rate of interest at the time of the extension. If Bank Indonesia issues a debt instrument and the holder of the debt instrument writes a call option on the debt instrument to a third party, then the issuer regards the call option as extending the term to maturity of the debt instrument provided the issuer can be required to participate in or facilitate the remarketing of the debt instrument as a result of the call option being exercised. (c) Equity-indexed interest or principal payments embedded in a host debt instrument or insurance contract—(by which the amount of interest or principal is indexed to the value of equity instruments) are not closely related to the host instrument because the risks inherent in the host and the embedded derivative are dissimilar. (d) Commodity-indexed interest or principal payments embedded in a host debt instrument (by which the amount of interest or principal is indexed to the price of a commodity, such as gold) are not closely related to the host instrument because the risks inherent in the host and the embedded derivative are dissimilar. (e) A call, put, or prepayment option embedded in a host debt contract is not closely related to the host contract unless the option‟s exercise price is approximately equal on each exercise date to the amortised cost of the host debt instrument or the carrying amount of the host insurance contract. (f) Credit derivatives that are in a host debt instrument and allow one party (the „beneficiary‟) to transfer the credit risk of a particular reference asset, which it may not own, to another party (the „guarantor‟)are not closely related to the host debt instrument. Such credit derivatives allow the guarantor to assume the credit risk associated with the reference asset without directly owning it. PP91. An example of a hybrid contract is a financial instrument that gives the holder the right to put the financial instrument back to the issuer in 6.82 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
178. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 exchange for an amount of cash or other financial assets that varies on the basis of the change in an equity or commodity index that may increase or decrease (a „puttable instrument‟). However, if Bank Indonesia at the time of initial recognition designates the instrument as a financial liability at fair value through the revaluation reserves, Bank Indonesia separates the embedded derivative (i.e., the indexed principal payment) from the host contract under paragraph 47 because the host contract is a debt instrument and the indexed principal payment is not closely related to the host debt instrument under paragraph PP90(a). Because the principal payments can increase or decrease, the embedded derivative is a non-option derivative whose value is indexed to the underlying variable. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 PP92. The economic characteristics and risks of an embedded derivative are closely related to the economic characteristics and risks of the host contract in the following examples. In these examples, Bank Indonesia does not account for the embedded derivative separately from the host contract. (a) An embedded derivative in which the underlying is an interest rate or interest rate index that can change the amount of interest that would otherwise be paid or received on an interest-bearing host debt contract is closely related to the host contract unless the hybrid contract can be settled in such a way that the holder would not recover substantially all of its recognised investment or the embedded derivative could at least double the holder‟s initial rate of return on the host contract and could result in a rate of return that is at least twice what the market return would be for a contract with the same terms as the host contract. (b) An embedded floor or cap on the interest rate on a debt contract is closely related to the host contract provided that the cap is at or above the market rate of interest and the floor is at or below the market rate of interest when the contract is issued, and the cap or floor is not leveraged in relation to the host contract. Similarly, provisions included in a contract to purchase or sell an asset (e.g., a commodity) that establish a cap and a floor on the price to be paid or received for the asset are closely related to the host contract if both the cap and floor were out of the money at inception and are not leveraged. (c) An embedded foreign currency derivative that provides a stream of principal and interest payments denominated in foreign currency and is embedded in a host debt instrument (e.g., a dual currency bond) is closely related to the host debt instrument. This derivative is not separated from the host instrument as PKAK 03: The Effects of Changes in Foreign Exchange Rates requires a foreign currency gain or loss on a monetary item to be recognised in the financial instruments revaluation reserves. 6.83 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
179. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 (d) (e) (f) An embedded foreign currency derivative in a host contract that is not a financial instrument (such as a contract for the purchase or sale of a non-financial item whose price is denominated in a foreign currency) is closely related to the host contract provided it is not leveraged, does not contain an option feature, and requires payment denominated in one of the following types of currency: (i) the functional currency of any substantial party to the contract; (ii) the currency in which the price of the related good or service that is acquired or delivered is routinely denominated in commercial transactions around the world (such as the US dollar for crude oil transactions); or (iii) a currency that is commonly used in contracts to purchase or sell non-financial items in the economic environment in which the transaction takes place (e.g., a relatively stable and liquid currency that is commonly used in local business transactions or external trade). An embedded prepayment option in an interest-only or principal-only strip is closely related to the host contract provided the host contract (i) initially resulted from separating the right to receive contractual cash flows of a financial instrument that, in and of itself, did not contain an embedded derivative, and (ii) does not contain any terms not present in the original host debt contract. Derivatives embedded in a host lease contract is closely related to the host contract if the embedded derivative is (i) an inflation-related index such an index of lease payments to a consumer price index (provided that the lease is not leveraged and the index relates to inflation in Bank Indonesia‟s economic environment), (ii) a contingent rental based on related sales, or (iii) a contingent rental based on a variable interest rate. Instruments Containing Embedded Derivatives PP93. As stated in paragraph PP87, if Bank Indonesia becomes a party to a hybrid contract with a host that is not an asset within the scope of this Statement and has one or more embedded derivatives, then paragraph 47 requires Bank Indonesia to identify every such embedded derivative, assess whether it is required to be separated from the host contract, and, for those that are required to be separated, measure the derivatives at fair value at initial recognition and subsequently. These requirements can be more complex or result in less reliable measures, than measuring the entire instrument at fair value through revaluation reserves. For that reason this Statement permits the entire hybrid contract to be designated as at fair value through revaluation reserves. 6.84 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
180. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 PP94. Designation of fair value through the revaluation reserves may be used whether paragraph 47 requires the embedded derivatives to be separated from the host contract or prohibits such separation. Nevertheless, paragraph 49 would not justify designating the hybrid contract as at fair value through revaluation reserves in the cases set out in paragraph 49(a) and (b) because doing so would not reduce complexity or increase reliability. Reassessment of Embedded Derivatives PP95. In accordance with paragraph 47, Bank Indonesia shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when Bank Indonesia first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. Bank Indonesia determines whether a modification to cash flows is significant by considering the extent to which the expected future cash flows associated with the embedded derivative, the host contract or both have changed and whether the change is significant relative to the previously anticipated cash flows on the contract. Reclassification of Financial Assets PP96. Paragraph 52 requires Bank Indonesia to reclassify financial assets if the objective of Bank Indonesia‟s business model for managing the financial assets changes. Such changes are expected to be infrequent. Such changes must be determined by the Board of Governors of Bank Indonesia as a result of internal or external changes, and must be significant to the Bank Indonesia‟s operations and demonstrable to external parties. A change in the objective of the Bank Indonesia‟s business model must be effected before the reclassification date. PP97. The following are not changes in business model: a change in intention related to particular financial assets (even in circumstances of significant changes in market conditions). (b) the temporary disappearance of a particular market for a financial asset. (a) MEASUREMENT (Paragraphs 54-86) Initial Measurement PP98. The fair value of financial assets at initial recognition is usually equal to the transaction price (i.e., the fair value of the consideration given or 6.85 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
181. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 received, see also paragraph PP100 and PKAK 07: Non-unique Transactions). However, if part of the payment of the consideration given or received is for something other than the financial instrument, the fair values of financial instruments are estimated using a valuation technique. For example, the fair value of a long-term loan or receivable that carries no interest can be measured as the present value of all future cash receipts discounted using the prevailing market rate(s) of interest for a similar instrument (similar as to currency, terms, type of interest rate, and other factors) with a similar credit rating. Any additional amount lent is an expense or a reduction of income unless it qualifies for recognition as some other type of asset. PP99. If Bank Indonesia originates a loan that bears an off-market interest rate (e.g., 5% while the market rate for similar loans is 8%) and receives an upfront fee as compensation, Bank Indonesia recognises the loan at its fair value, i.e., net of the fee it receives. PP100. The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price (i.e., the fair value of the consideration given or received, see also PKAK 07: Non-Unique Transactions). If Bank Indonesia determines that the fair value at initial recognition differs from the transaction price as referred to in paragraph 55, Bank Indonesia shall account for that instrument at initial recognition as follows: (a) at the measurement required by paragraph 54, if the fair value is evidenced by a quoted price in an active market for an identical financial asset or liability (i.e., a Level 1 input) or based on a valuation technique that uses only observable market data. Bank Indonesia shall recognise the difference between the fair value at initial recognition and the transaction price as a gain or loss. (b) In all other cases, at the measurement required by paragraph 54, adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, Bank Indonesia shall recognise the deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability. Subsequent Measurement of Financial Assets PP101. When a financial instrument that was previously recognised as a financial asset is measured at fair value and the fair value subsequently decreases below zero, Bank Indonesia recognises this as a financial liability under paragraph 43. However, hybrid contracts with hosts that are assets within the scope of this Statement are always measured in accordance with paragraph 46. 6.86 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
182. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 PP102. The following example illustrates the accounting for transaction costs that occur at initial measurement and subsequent measurement of a financial asset measured at fair value with changes through revaluation reserves. Bank Indonesia acquires an asset for Rp100 plus a purchase commission of Rp2. Initially, the asset is recognised at Rp102. The reporting period ends one day later, when the quoted market price of the asset is Rp100. If the asset were sold, a commission of Rp3 would be paid. On that date, the asset is valued at Rp100 (without regard to the possible commission on sale) and recognises a loss of Rp2 in financial instruments revaluation reserves. PP103. The subsequent measurement of a financial asset or financial liability and the subsequent recognition of gains or losses, as described in paragraph PP100, shall be consistent with the requirements of this Statement. Amortised Cost Measurement PP104. In some cases, financial assets are acquired at a deep discount that reflects incurred credit losses. Bank Indonesia includes such incurred credit losses in the estimated cash flows when computing the effective interest rate. PP105. When Bank Indonesia applies the effective interest method, it generally amortises any fees, points paid or received, transaction costs and other premiums or discounts that are included in the calculation of the effective interest rate over the expected life of the instrument. However, a shorter period is used if such period is associated with the fees, points paid or received, transaction costs, and premiums or discounts. This will be the case when the variable to which the fees, points paid or received, transaction costs and premiums or discounts relate is repriced to market rates before the expected maturity of the instrument. In such a case, the appropriate amortization period is the period to the next such repricing date. PP106. For floating rate financial assets and floating rate financial liabilities, periodic re-estimation of cash flows to reflect movements in market rates of interest alters the effective interest rate. If a floating rate financial asset or floating rate financial liability is recognised initially at an amount equal to the principal receivable or payable on maturity, re-estimating the future interest payments normally has no significant effect on the carrying amount of the asset or liability. 6.87 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
183. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 PP107. If Bank Indonesia revises its estimates of payments or receipts, Bank Indonesia adjusts the carrying amount of the financial asset or financial liability (or group of financial instruments) to reflect actual and revised estimated cash flows. Bank Indonesia recalculates the carrying amount by computing the present value of estimated future cash flows at the financial instrument's original effective interest rate or, when applicable, the calculation of the effective interest rate that is revised in accordance with paragraph 110. This adjustment is recognised as income or expense in surplus deficit. If a financial asset is reclassified in accordance with paragraphs 67 and 68, and Bank Indonesia then increases the estimated future cash receipts as a result of an increase in the recovery of cash receipts, the effect of the increase is recognised as an adjustment to the effective interest rate from the date of change in estimate rather than as an adjustment to the carrying value of the asset on the date of change in estimate. Gains or Losses PP108. Bank Indonesia applies PKAK 03: The Effects of Changes in Foreign Exchange Rates to financial assets and financial liabilities that are monetary items, as referred to in PKAK 03, and denominated in foreign currency. PKAK 03 requires any foreign exchange gains and losses on monetary assets and monetary liabilities to be recognised in revaluation reserves. PP109. If there is a hedging relationship between a non-derivative monetary asset and non-derivative monetary liability, changes in the foreign currency component of those financial instruments are presented in revaluation reserves in accordance with PKAK 03: Effects of Changes in Foreign Exchange Rates. Impairment of Financial Assets and Uncollectibles Financial Assets Recorded at Amortised Cost PP110. Impairment of financial assets carried at amortised cost is measured using the original effective interest rate of the financial asset because discounting at the current market rate of interest would, in effect, impose fair value measurement on financial assets that are otherwise measured at amortised cost. If the terms of financial assets carried at amortised cost are renegotiated or otherwise modified because of the borrower or issuer's financial difficulties, impairment is measured using the original effective interest rate before the modification of the terms. Cash flows relating to short term receivables are not discounted if the effect of 6.88 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
184. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 discounting is immaterial. If a financial asset carried at amortised cost has a variable interest rate, the discount rate for measuring any impairment loss under paragraph 81 is the current effective interest rate(s) determined under the contract. As a practical expedient, Bank Indonesia may measure impairment of a financial asset carried at amortised cost on the basis of an instrument's fair value using an observable market prices. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. PP111. The process for estimating impairment considers all credit exposures, not only those of low credit quality. For example, when Bank Indonesia uses an internal credit grading system it considers all credit grades, not only those reflecting a severe credit deterioration. PP112. The process of estimating the amount of an impairment loss may result either in a single amount or in a range of possible amounts. In the latter case, Bank Indonesia recognises an impairment loss equal to the best estimate within the range taking into account all relevant information available before the financial statements are issued about conditions existing at the end of the reporting period. PP113. For the purposes of a collective evaluation of impairments, financial assets are grouped on the basis of similar credit risk characteristics that are indicative of the debtors' ability to pay all amounts due according to the contractual terms (for example, on the basis of a credit risk evaluation or grading process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). The characteristics chosen are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the asset being evaluated. However, loss probabilities and other loss statistics will differ at a group level between (a) assets that have been individually evaluated for impairment and found not to be impaired and (b) assets that have not been individually evaluated for impairment, with the result that a different amount of impairment may be required. If Bank Indonesia does not have a group of assets that have similar risk characteristics, it does not make the additional assessment. PP114. Impairment losses recognised on a group basis represent an interim step pending the identification of impairment losses on individual assets in the group of financial assets that are collectively assessed for impairment. As soon as information is available that specifically identifies 6.89 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
185. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 losses on individually impaired assets in a group, those assets are removed from the group. PP115. Future cash flows from a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. If Bank Indonesia does not have specific loss experience or insufficient experience, use peer group experience for comparable groups of financial assets. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of the changes in future cash flows reflect and are directionally consistent with changes in related observable data from period to period (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. PP116. When using historical loss rates in estimating future cash flows, it is important that information about historical loss rates is applied to groups that are defined in a manner consistent with the groups for which the historical losses were observed. Therefore, the method used should enable each group to be associated with information about past loss experience in groups of assets with similar credit risk characteristics and relevant observable data that reflect current conditions. PP117. Formula-based approaches or statistical methods may be used to determine the impairment losses in a group of financial assets (e.g., for smaller balance loans) as long as they are consistent with the requirements in paragraphs 81-83 and PP113-PP116. Any model used would incorporate the effect of the time value of money, consider the cash flows for all of the remaining life of an asset (not only the next year), consider the age of the loans within the portfolio and not give rise to an impairment loss on initial recognition of a financial asset. Interest Income after Recognition of Impairment PP118. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognised using the interest rate used to discount future cash flows for the purpose of measuring the impairment loss. 6.90 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
186. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 HEDGING (Paragraphs 87-118) Hedging Instruments Qualifying Instruments PP119. The potential losses on options written by Bank Indonesia could be significantly greater than the potential gain in value of a related hedged item. In other words, a written option is not effective in reducing the profit or loss exposure of a hedged item. Therefore, a written option does not qualify as a hedging instrument, unless it is designated as an offset to a purchased option, including one that is embedded in another financial instrument (for example, a written call option used to hedge a callable liability). In contrast, a purchased option has potential gains equal to or greater than losses and therefore has the potential to reduce profit or loss exposure from changes in fair value or cash flows. Accordingly, it can qualify as a hedging instrument. PP120. Financial assets carried at amortised cost may be designated as hedging instruments in a hedge of foreign currency risk. Hedged Items Qualifying Items PP121. Bank Indonesia can designate all changes in the cash flows or the fair value of a hedged item in a hedging relationship. Bank Indonesia can also designate only changes in the cash flows or the fair value of a hedged item that are above or below a specified level or other variable (a one-sided risk). The intrinsic value of a purchased option as a hedging instrument (assuming that it has the same principal terms as the designated risk), but not its time value, reflects one-sided risk in a hedged item. For example, Bank Indonesia can designate future cash flow variability resulting from a price increase of a forecast commodity purchase. In such a situation, only cash flow losses resulting from a price increase above specified level are designated. The hedged risk does not include the time value of a purchased option because the time value is not a component of the forecast transaction that affects the surplus deficit (paragraph 103(b)). Designation of Financial Items as Hedged Items PP122. If a portion of the cash flows of a financial asset or financial liability is designated as the hedged item, that designated portion must be less than the total cash flows of the asset or liability. For example, in the 6.91 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
187. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 case where a liability whose effective interest rate is below JIBOR, Bank Indonesia cannot designate (a) that portion of the liability that is equal to the amount of the principal plus interest at JIBOR; and (b) a negative residual portion. However, Bank Indonesia may designate all of the cash flows of the entire financial asset or financial liability as the hedged item and hedge them for only one particular risk (e.g., only for changes that are attributable to changes in JIBOR). For example, in the case of a financial liability whose effective interest rate of 100 basis points below JIBOR, then Bank Indonesia can designate the entire liability as the hedged item (i.e., the principal plus interest at JIBOR minus 100 basis points) and hedge the change in the fair value or cash flows of that entire liability that is attributable to changes in JIBOR. Bank Indonesia may also choose a hedge ratio of other than one-toone in order to improve the effectiveness of the hedge, as described in paragraph PP126. PP123. In addition, if a fixed rate financial instrument is hedged sometime after its origination and interest rates have changed in the meantime, Bank Indonesia can designate a portion equal to a benchmark rate that is higher than the contractual rate paid on the item. Bank Indonesia can do so provided that the benchmark rate is less than the effective interest rate calculated on the assumption that Bank Indonesia had purchased the instrument on the day it first designates the hedged item. For example, assume Bank Indonesia originates a fixed rate financial asset of Rp100 that has an effective interest rate of 6% at a time when JIBOR is 4%. It begins to hedge that asset some time later when JIBOR has increased to 8% and the fair value of the asset has decreased to Rp90. Bank Indonesia calculates that if it had purchased the asset on the date it first designates it as the hedged item for its then fair value of Rp90, the effective yield would have been 9.5%. Because JIBOR is less than this effective yield, Bank Indonesia can designate a JIBOR portion of 8% that consists partly of the contractual interest cash flows and partly of the difference between the current fair value (Rp90) and the amount repayable on maturity (Rp100). PP124. Paragraph 97 allows Bank Indonesia to designate things other than the entire change in fair value or the cash flow variability of financial instruments. For example: (a) All cash flows of a financial instrument may be designated for changes in cash flows or fair valuearising from some (but not all) risks; or (b) some (but not all) cash flows of a financial instrument may be designated for changes in cash flows or fair value arising from all or only some risks (i.e., 'part' of the cash flow of a financial instrument may be designated for changes attributable to all or only some risks). 6.92 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
188. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 PP125. To qualify for hedge accounting, the designated risk and part represent separate components that can be identified from financial instruments, and changes in cash flows or the fair values of all financial instruments arising from changes in the designated risk and part can be measured reliably. For example: (a) for a fixed rate financial instrument hedged for changes in fair value arising from changes in a risk-free interest rate or benchmark interest rate, the risk-free interest rate or benchmark rate is normally regarded as a separate component that can be identified from the financial instrument and can be measured reliably. (b) inflation is not a separate part that can be identified and measured reliably and cannot be designated as a risk or part of a financial instrument unless the requirements of subparagraph (c) are met. (c) the contractually specified inflation portion of the cash flows of a recognised inflation linked bond (assuming there is no need to account for the embedded derivative separately) is separately identifiable and can be measured reliably provided that other cash flows of the instrument are not affected by the inflation part. Designation of Non-financial Items as Hedged Items PP126. Changes in the prices of an ingredient or component of a nonfinancial asset or liability generally do not have a predictable, separately measurable effect on the price of the item that is comparable to the effect of, say, a change in market interest rates on the price of a bond. Therefore, a non-financial asset or liability can only be hedged in its entirety or for foreign exchange risk. When there is a difference between the terms of the hedging instrument and the hedged item the hedging relationship can qualify as a hedge relationship provided all the conditions in paragraph 105 are met, including that the hedge is expected to be highly effective. For this purpose, the amount of the hedging instrument may be greater or less than the amount of the hedged item if this improves the effectiveness of the hedging relationship. For example, a regression analysis could be performed out to establish a statistical relationship between the hedged item and the hedging instrument. If there is a valid statistical relationship between these two variables, the slope of the regression line can be used to establish the hedge ratio that will maximize expected effectiveness. For example, if the slope of the regression line is 1.02, hedge ratio based on 0.98 quantities of hedged items to 1.00 quantities of the hedging instrument maximises expected effectiveness. 6.93 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
189. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Designation of Groups of Items as Hedged Items PP127. A hedge of the overall net position (e.g., the net of all fixed rate assets and fixed rate liabilities with similar maturities), rather than of a specific hedged items, does not qualify for hedge accounting. However, almost the same effect on surplus deficit of hedge accounting for this type of hedging relationship can be achieved by designating part of the underlying items as hedged item. For example, if Bank Indonesia has Rp100 of assets and Rp90 of liabilities with risks and terms of a similar nature and hedges the net Rp10 exposure, it can designate as the hedged item Rp10 of those assets. This designation can be used if such assets and liabilities are fixed rate instruments, in which case it is a fair value hedge, or if they are variable rate instruments, in which case it is a cash flow hedge. Similarly, if Bank Indonesia has a firm commitment to make a purchase denominated in a foreign currency of Rp100 and has a firm commitment to make a sale in the foreign currency of Rp90, it can hedge the net amount of Rp10 by acquiring a derivative and designating it as a hedging instrument associated with Rp10 of the firm purchase commitment of Rp100. Hedge Accounting PP128. An example of a fair value hedge is a hedge of exposure to changes in the fair value of a fixed rate debt instrument as a result of changes in interest rates. Such a hedge could be entered into by the issuer or by the holder. PP129. An example of a cash flow hedge is the use of a swap to change floating rate debt to fixed-rate debt (i.e., a hedge of a future transaction where the future cash flows being hedged are the future interest payments). PP130. A hedge of a firm commitment is a hedge of an exposure to a change in fair value. Accordingly, such a hedge is a fair value hedge. However, under paragraph 104 a hedge of the foreign currency risk of a firm commitment could alternatively be accounted for as a cash flow hedge. Assessing Hedge Effectiveness PP131. A hedge is considered highly effective if the following two conditions are fulfilled: (a) At the inception of the hedge and in the subsequent period, the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated. Such an expectation can be demonstrated in various ways, including a comparison of past changes 6.94 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
190. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (b) in the fair value or cash flows of the hedged item attributable to the hedged risk with past changes in the fair value or cash flows of the hedging instrument, or by demonstrating a high statistical correlation between the fair value or cash flows of the hedged item and the fair value or cash flows of the hedging instrument. Bank Indonesia may choose a hedge ratio of other than one to one in order to improve the effectiveness of the hedge, as described in paragraph PP126. The actual results of the hedge are within a range of 80-125%. For example, if the actual result of the hedge is a loss on the hedging instrument of Rp120 and a gain on the hedged instrument of Rp100, then the offset can be measured as 120/100, which is 120%, or as 100/120, which is 83%. In this example, if it is assumed that this hedge meets the condition subparagraph (a), then Bank Indonesia would conclude that the hedge has been highly effective. PP132. Effectiveness is assessed, at a minimum, at the time when Bank Indonesia prepares its annual or interim financial statements. PP133. This Statement does not specify a single method for assessing hedge effectiveness. The method used by Bank Indonesia depends on its risk management strategy. For example, if Bank Indonesia‟s risk management strategy is to adjust the amount of the hedging instrument periodically to reflect changes in the hedged position, Bank Indonesia needs to demonstrate that the hedge is expected to be highly effective only for the period until the amount of the hedging instrument is next adjusted. In some cases, Bank Indonesia adopts different methods for different types of hedges. Bank Indonesia‟s documentation of its hedging strategy includes its procedures for assessing effectiveness. These procedures state whether the assessment includes all of the gain or loss on a hedging instrument or whether the instrument's time value is excluded. PP134. If Bank Indonesia hedges less than 100% of the exposure on an item, for example, 85%, then Bank Indonesia shall designate the hedged item as being 85% of the exposure and shall measure ineffectiveness based on the change in that designated 85% exposure. However, when hedging the designated 85% exposure, Bank Indonesia may use a hedge ratio of other than one to one if that improves the expected effectiveness of the hedge, as described in paragraph PP126. PP135. If the principal terms of the hedging instrument and of the hedged item (asset, liability, firm commitment or highly probable forecast transaction), then the changes in fair value and cash flows attributable to the risk being hedged may be likely to offset each other fully, both when the hedge is entered into and afterwards. For example, an interest rate swap is 6.95 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
191. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 likely to be an effective hedge if the notional and principal amounts, term, repricing dates, dates of interest and principal receipts and payments, as well as the basis for measuring the interest rate, are the same for the hedging instrument and the hedged item. Furthermore, a hedge of a highly probable forecast purchase of a commodity with a forward contract is likely to be highly effective if: (a) the forward contract is for the purchase of the same quantity of the same commodity at the same time and location as the hedged forecast purchase; (b) the fair value of the forward contract at inception is zero; and (c) either the change in the discount or premium on the forward contract is excluded from the assessment of effectiveness and recognised in surplus deficit, or the change in expected cash flows on the highly probable forecast transaction is based on the forward price of the commodity. PP136. Sometimes the hedging instrument offsets only part of the hedged risk. For example, a hedge would not be fully effective if the hedging instrument and the hedged item are denominated in different currencies that do not move in tandem. Also, a hedge of interest rate risk using a derivative would not be fully effective if part of the change in the fair value of the derivative is attributable to the counterparty's credit risk. PP137. To qualify for hedge accounting, the hedge must relate to a specific identified and designated risk, and not merely to general business risks, and must ultimately affect surplus deficit. A hedge of the risk of obsolescence of a physical asset or the risk of expropriation of property by a government is not eligible for hedge accounting because the effectiveness of the hedge cannot be measured reliably. PP138. Paragraph 90(a) permits Bank Indonesia to separate the intrinsic value and time value of an option contract and designate as the hedging instrument only the change in the intrinsic value of the option contract. Such a designation may result in a hedging relationship that is perfectly effective in achieving offsetting changes in cash flows attributable to a hedged one-sided risk of a forecast transaction, if the principal terms of the forecast transactions and hedging instruments are the same. PP139. When Bank Indonesia designates a purchased option in its entirety as the hedging instrument of a one-sided risk arising from a forecast transaction, the hedging relationship will not be perfectly effective. This is because the premium paid for the option includes time value and, as stated in paragraph PP121, a designated one-sided risk does not include the time value of an option. Therefore, in this situation, there will be no offset between 6.96 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
192. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 the cash flows relating to the time value of the option premium that was paid and the designated hedged risk. PP140. In the case of interest rate risk, hedge effectiveness may be assessed by preparing a maturity schedule of financial assets and financial liabilities that shows the net interest rate exposure for each time period, as long as the net exposure is associated with a specific asset or liability (or a specific group of assets or liabilities or a specific portion of such group) that gives rise to the net exposure, and hedge effectiveness is assessed against that asset or liability. PP141. In assessing hedge effectiveness, Bank Indonesia generally considers the time value of money. The fixed interest rate on a hedged item need not exactly match the fixed interest rate on a swap designated as a fair value hedge. Nor does the variable interest rate on an interest-bearing asset or liability need to be the same as the variable interest rate on a swap designated as a cash flow hedge. A swap‟s fair value derives from its net settlements. The fixed and variable interest rates on a swap can change without affecting the net settlement if both changed by the same amount. PP142. If Bank Indonesia does not meet hedge effectiveness criteria, Bank Indonesia discontinues hedge accounting from the last date on which Bank Indonesia was able to satisfy the hedge effectiveness criteria. However, if Bank Indonesia identifies the event or change in circumstances that caused the hedging relationship to fail the effectiveness criteria, and demonstrates that the hedge was effective before the event or change in circumstances occurred, Bank Indonesia will discontinue hedge accounting from the date of the event or change in circumstances. Fair Value Hedge Accounting for a Portfolio Hedge of Interest Rate Risk PP143. For a fair value hedge of interest rate risk associated with a portfolio of financial assets or financial liabilities, Bank Indonesia would meet the requirements of this Statement if it complies with the procedures set out in subparagraphs (a) - (i) and paragraph PP144-PP161 below: (a) As part of the risk management process, Bank Indonesia identifies a portfolio of items whose interest rate risk it wishes to hedge. The portfolio may comprise only assets, only liabilities or both assets and liabilities. Bank Indonesia may identify two or more portfolios (e.g., Bank Indonesia may group financial assets at fair value through the revaluation reserves into a separate portfolio), in which case it applies the guidance below to each portfolio separately. 6.97 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
193. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 (b) (c) (d) (e) (f) (g) (h) (i) Bank Indonesia analyses the portfolio into repricing time periods based on expected, rather than contractual, repricing dates. The analysis into repricing time periods may be performed in various ways including scheduling cash flows into the periods in which they are expected to occur, or scheduling notional principal amounts into all periods until repricing is expected to occur. Based on this analysis, Bank Indonesia decides the amounts that it wishes to hedge. The Bank designates as the hedged item an amount of assets or liabilities (but not a net amount) from the identified portfolio equal to the amount it wishes to designate as being hedged. This amount also determines the percentage measure that is used for testing effectiveness in accordance with paragraph PP155(b). Bank Indonesia designates the interest rate risk it is hedging. This risk could be a portion of the interest rate risk in each of the items in the hedged position, such as the benchmark interest rate (e.g., JIBOR). Bank Indonesia designates one or more hedging instruments for each repricing time period. Using the designations made in subparagraphs (c) - (e) above, Bank Indonesia assesses at inception and in subsequent periods, whether the hedge is expected to be highly effective during the period for which the hedge is designated. Periodically, Bank Indonesia measures the change in the fair value of the hedged item (as designated in subparagraph (c)) that is attributable to the hedged risk (as designated in subparagraph (d)), on the basis of the expected repricing dates determined in subparagraph(d). Provided that the hedge is determined actually to have been highly effective when assessed using the documented method of assessing effectiveness, Bank Indonesia recognises the change in fair value of the hedged item as a gain or loss in financial instruments revaluation reserves as a separate part, as described in paragraph 107. The change in fair value need not be allocated to individual asset or liability. Bank Indonesia measures the change in fair value of the hedging instrument (as designated in subparagraph (e)) and recognises such changes as a gain or loss in financial instruments revaluation reserves. The fair value of the hedging instrument(s)is recognised as an asset or liability in the statement of financial position. Any ineffectiveness will be recognised in financial instrument revaluation reserves as the difference between the change in fair value referred to in subparagraphs (g) and that referred to in subparagraphs (h). 6.98 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
194. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 PP144. This approach is described in more detail below. The approach shall be applied only to a fair value hedge of the interest rate risk associated with a portfolio of financial assets or financial liabilities. PP145. The portfolio identified in accordance with paragraph PP143(a) could contain assets and liabilities. Alternatively, it could be a portfolio containing only assets, or only liabilities. The portfolio is used to determine the amount of the assets or liabilities the entity wishes to hedge. However, the portfolio is not itself designated as the hedged item. PP146. In applying paragraph PP143(b), Bank Indonesia determines the expected repricing date of an item as the earlier of the dates when that item is expected to mature or to reprice to market rates. The expected repricing dates are estimated at the inception of the hedge and throughout the term of the hedge, based on historical experience and other available information, including information and expectations regarding prepayment rates, interest rates and the interaction between them. If Bank Indonesia does not have specific experience, or insufficient experience, use peer group experience for comparable financial instruments. These estimates are reviewed periodically and updated in the light of experience. In the case of a fixed rate item that is prepayable, the expected repricing date is the date on which the item is expected to prepay unless it reprices to market rates on an earlier date. For a group of similar items, the analysis into time periods based on expected repricing dates may take the form of allocating a percentage of the group, rather than individual items, in each time period. Bank Indonesia may apply other methodologies for such allocation purposes. For example, Bank Indonesia prepayment rate multiplier for allocating amortising loans to time periods based on expected repricing dates. However, the methodology for such an allocation shall be in accordance with Bank Indonesia‟s risk management procedures and objectives. PP147. As an example of the designation of a hedged item under paragraph PP143(c), if in a particular repricing time period Bank Indonesia estimates that it has fixed rate assets worth Rp100 and fixed rate liabilities of Rp80 and decides to hedge all of the net position of Rp20, it designates a portion of the assets worth Rp20 as the hedged item. The designation is expressed as an „amount of a currency‟ (e.g., an amount of rupiah, dollars, euros, pounds) rather than as individual assets. It follows that all of the assets (or liabilities) from which the hedged amount is drawn—i.e., all of the Rp100 of assets in the above example—must be: (a) items whose fair values changes in response to changes in the interest rate being hedged; and (b) items that could have qualified for fair value hedge accounting if they had been designated as hedged individually. In particular, because this 6.99 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
195. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Statement specifies that the fair value of a financial liability with a demand feature (such as demand deposits and some types of time deposits) is not less than the amount payable on demand (discounted from the first date on which such amount can be required to be paid), then the item cannot qualify for fair value hedge accounting for any period of time beyond the shortest period in which the holder can demand payment. In the above example, the hedged position is an amount of assets. Hence, such liabilities are not a part of the designated hedged item, but are used by Bank Indonesia to determine the amount of the asset that is designated as being hedged. If the position that Bank Indonesia wishes to hedged was an amount of liabilities, the amount representing the designated hedged item must be drawn from fixed rate liabilities other than liabilities that can be required to repay in an earlier time period, and the percentage measure used for assessing hedge effectiveness in accordance with paragraph PP155(b) would be calculated as a percentage of these other liabilities. For example, assume that Bank Indonesia estimates that in a particular repricing time period it has fixed rate liabilities of Rp100, comprising Rp40 of demand deposits and Rp60 of liabilities with no demand feature, and Rp70 of fixed rate assets. If Bank Indonesia decides to hedge all of the net position of Rp30, it designates as the hedged item liabilities of Rp30 or 50% of the liabilities with no demand feature. PP148. Bank Indonesia also must comply with the other designation and documentation requirements as set out in paragraph 105(a). For a portfolio hedge of interest rate risk, such designation and documentation specifies the Bank Indonesia‟s policy for all of the variables that are used to identify the amount that is hedged and how effectiveness is measured, including the following: (a) which assets and liabilities are to be included in the portfolio hedge and the basis to be used for removing them from the portfolio; (b) how Bank Indonesia estimates repricing dates, including what interest rate assumptions underlie estimates of prepayment rates and the basis for changing those estimates. The same method is also used for both the initial estimate made at the time an asset or liability is included in the hedged portfolio and for any later revisions to those estimates. (c) the number and duration of repricing time periods. (d) the frequency of testing effectiveness and which of the two methods presented in paragraph PP155 it will be used. (e) the methodology used by Bank Indonesia in determining the amount of assets or liabilities that are designated as hedged items, and, accordingly, the percentage measure used when Bank Indonesia tests effectiveness using the methods described in paragraph PP155(b). 6.100 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
196. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 (f) when Bank Indonesia tests the effectiveness using the methods described in paragraph PP155 (b), whether Bank Indonesia will test effectiveness for each repricing time period individually, for all time periods in aggregate, or by using some combination of the two. The policies specified in designating and documenting the hedging relationship shall be in accordance with Bank Indonesia‟s risk management procedures and objectives. Changes in policies shall not be made arbitrarily. They shall be justified on the basis of changes in market conditions and other factors, and be founded on and be consistent with the risk management procedures and objectives of Bank Indonesia. PP149. The hedging instrument referred to in paragraph PP143(e) may be a single derivative or a portfolio of derivatives, all of which contain exposure to the interest rate risk that is hedged, as designated in accordance with paragraph PP143(d) (e.g., a portfolio of interest rate swaps all of which contain exposure to JIBOR). Such a portfolio of derivatives may contain offsetting risk positions. However, the portfolio may not include written options or net written options because this Statement does not permit such options to be designated as hedging instruments (except when: a written option is designated as an offset to a purchased option). If the hedging instrument hedges the amount designated in accordance with PP143(c) for more than one repricing time period, it is allocated to all of the time periods that it hedges. However, the whole of the hedging instrument must be allocated to those repricing time periods because this Statement does not permit a hedging relationship to be designated for only a portion of the time period during which a hedging instrument remains outstanding. PP150. When Bank Indonesia measures the change in the fair value of a prepayable item in accordance with PP143(g), then a change in interest rates affects the fair value of the item in two ways, namely, by affecting the fair value of the contractual cash flows and the fair value of the prepayment option that is contained in a prepayable item. Paragraph 97 permits Bank Indonesia to designate a portion of a financial asset or financial liability, sharing a common risk exposure, as the hedged item provided effectiveness can be measured. For prepayable items, paragraph 98 permits this to be achieved by designating the hedged item in terms of the change in the fair value that is attributable to changes in the designated interest rate on the basis of expected, rather than contractual, repricing dates. However, the effect that changes in the hedged interest rate have on those expected repricing dates shall be included when determining the change in the fair value of the hedged item. Consequently, if the expected repricing dates are revised (e.g., to reflect a change in expected prepayments), or if actual repricing dates differ from those expected, ineffectiveness will arise as described in paragraph PP155. Conversely, changes in expected repricing 6.101 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
197. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 dates that (a) clearly arise from factors other than changes in the hedged interest rate; (b) are uncorrelated with changes in the hedged interest rate; and (c) can be reliably separated from changes that are attributable to the hedged interest rate (e.g., changes in prepayment rates clearly arising from a change in demographic factors or tax regulations rather than changes in interest rates) are excluded from the determination of changes in the fair value of the hedged item, because they are not attributable to the hedged risk. If there is uncertainty about the factor that gave rise to the change in expected repricing dates or Bank Indonesia is not able to separate reliably the changes that arise from the hedged interest rate from those that arise from other factors, the change is assumed to arise from. PP151. This statement does not specify the techniques to be used to determine amount in accordance with PP143(g), that is, the change in the fair value of the hedged item that is attributable to the hedged risk. If statistical or other estimation techniques are used in measurement, then Bank Indonesia management must expect the result to approximate closely that which 
would have been obtained from measurement of all the individual assets or liabilities that constitute the hedged item. It is not appropriate to assume that changes in the fair value of the hedged item are equal to changes in the value of the hedging instrument. PP152. Paragraph 107 requires that if the hedged item for a particular repricing time period is an asset, the change in its value is presented in a separate line item within assets. Conversely, if the hedged item for a particular repricing time period is a liability, the change in its value is presented in a separate line item within liabilities. Both are items that are recognised as separate parts in accordance with PP143(g). A specific allocation to an individual asset (or individual liability) is not required. PP153. Paragraph PP143(i) notes that ineffectiveness arises when a change in the fair value of the hedged item that is attributable to the hedged risk is different to the change in the fair value of the hedging derivative. This difference may be due to several reasons, including: (a) actual repricing dates being different from those expected, or expected repricing dates being revised; (b) items : in the hedged portfolio becoming impaired or derecognised; (c) the payment dates of the hedging instrument and the hedged item being different; and (d) other causes (e.g., when a few of the hedged items bear interest at a rate below the benchmark rate for which they are designated as being hedged, and the resulting ineffectiveness is not so great that the portfolio as a whole fails to qualify for hedge accounting). 6.102 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
198. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Such ineffectiveness shall be identified and recognised in financial instruments revaluation reserve. PP154. Generally, the effectiveness of the hedge will be improved: if Bank Indonesia schedules items with different prepayment characteristics in a way that takes into account the differences in prepayment behaviour. (b) When the number of items in the portfolio is larger. When only a few items are contained in the portfolio, relatively high ineffectiveness is likely if one of the items prepays earlier or later than expected. Conversely, if the portfolio consists of a large number of items, then prepayment behaviour can be predicted more accurately. (c) when the repricing time periods used are narrower (e.g., 1-month as opposed to 3-month repricing time periods). Narrower repricing time periods reduce the effect of any mismatch between the repricing and payment dates (within the repricing time period) of the hedged item and those of the hedging instrument. (d) the greater the frequency with which the amount of the hedging instrument is adjusted to reflect changes in the hedged item (e.g., because of changes in prepayment expectations). (a) PP155. Bank Indonesia periodically tests effectiveness. If estimates of repricing dates change between one date on which Bank Indonesia assesses effectiveness and the next, it shall calculate the amount of effectiveness either: (a) as the difference between the change in the fair value of the hedging instrument (see paragraph PP143(h)) and the change in the value of the entire hedged item that is attributable to changes in the hedged interest rate (including the effect that changes in the hedged interest rate have on the fair value of any embedded prepayment option); or (b) using the following approximation, Bank Indonesia: (i) calculates the percentage of assets (or liabilities) in each repricing time period that was hedged, on the basis of the estimated repricing dates at the last date it tested effectiveness. (ii) applies this percentage to its revised estimate of the amount in that repricing time period to calculate the amount of the hedged item based on its revised estimate. (iii) calculates the change in the fair value of its revised estimate of the hedged item that is attributable to the hedged risk and presents it as described in paragraph PP143(g). (iv) recognises ineffectiveness equal to the difference between the amount specified in subparagraph (iii) and the change in the fair value of the hedging instrument (see paragraph PP143(h)). 6.103 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
199. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 PP156. When measuring effectiveness, Bank Indonesia distinguishes revisions to the estimated repricing dates of existing assets (or liabilities) from the origination of new assets (or liabilities), with only the former giving rise to ineffectiveness. All revisions to estimated repricing dates (other than those excluded by paragraph PP150), including any reallocation of existing items between time periods, are taken into account when revising the estimated amount in a time period in accordance with PP155(b)(ii), and hence when measuring ineffectiveness. If ineffectiveness has been recognised as described above, Bank Indonesia establishes a new estimate of the total assets (or liabilities) in each repricing time period, including new assets (or liabilities) that have been originated since it last tested effectiveness, and designates a new amount as the hedged item and a new percentage as the hedged percentage. The procedures set out in paragraph PP155(b) are then repeated on the next date of effectiveness testing. PP157. Items that were originally scheduled into a repricing time period may be derecognised because of earlier than expected prepayment or writeoffs caused by impairment or sale. When this occurs, the amount of change in fair value included in the separate line item referred to in paragraph PP143(g) that relates to the derecognised item shall be removed from the statement of financial position, and included in the gain or loss that arises on derecognition of the item. For this purpose, it is necessary to know the repricing time period(s) into which the derecognised item was scheduled, because this determines the repricing time period(s) from which to remove it and hence the amount to remove from the 
 separate line item referred to in paragraph PP143(g). When an item is derecognised, if it can be determined in which time period it was included, it is removed from that time period. If not, it is removed from the earliest time period if the derecognition resulted from higher than expected prepayments, or allocated to all time periods containing the derecognised item on a systematic and rational basis if the item was sold or became impaired. PP158. In addition, any amount relating to a particular time period that has not been derecognised when the time period expires is recognised in surplus deficit at that time (see paragraph 107). For example, assume that Bank Indonesia schedules items into three repricing time periods. At the previous redesignation, the change in fair value reported in the single line item in the statement of financial position was an asset of Rp25. That amount represents amounts attributable to periods 1, 2 and 3 of Rp7, Rp8 and Rp10, respectively. At the next redesignation, the assets attributable to period 1 have been either realised or rescheduled into next period. Therefore, Rp7 is derecognised from the statement of financial position and recognised in the surplus deficit. The values of Rp8 and Rp10 are now attributable to 6.104 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
200. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 periods 1 and 2, respectively. These remaining periods are then adjusted, as necessary, for changes in fair value as described in paragraph PP143(g). PP159. As an illustration of the requirements in the two previous paragraphs, assume that Bank Indonesia scheduled assets by allocating a percentage of the portfolio into each repricing time period. Assume also that it scheduled Rp100 into each of the first two time periods. When the first repricing time period expires, Rp110 of assets are derecognised because of expected and unexpected repayments. In this case, all of the amount contained in the separate line item referred to in paragraph PP143(g) that relates to the first time period, are derecognised, plus 10% of the amount related to the second time period. PP160. If the hedged amount for a repricing time period is reduced without derecognition of the related asset (or liability), then the amount included in the separate line item referred to in paragraph PP143(g),that relates to the reduction shall be amortised in accordance with paragraph 110. PP161. Bank Indonesia may wish to apply the approach set out in paragraphs PP143-PP160 to a portfolio hedge that had previously been accounted for as a cash flow hedge in accordance with this Statement. Bank Indonesia would revoke the previous designation of a cash flow hedge in accordance with paragraph 118(d) and apply the requirements set out in that paragraph. Bank Indonesia would also redesignate the hedge as a fair value hedge and apply the approach outlined in paragraph PP143-PP160 prospectively to subsequent accounting periods. PRESENTATION (Paragraphs 119-129) Offsetting a Financial Asset and a Financial Liability PP162. To offset a financial asset and a financial liability, Bank Indonesia must have a currently enforceable legal right to set off the recognised amounts. Bank Indonesia may have a conditional right to set off recognised amounts, such as in a master netting agreement or in some forms of non-recourse debt, but such rights are enforceable only on the occurrence of some future event, usually a default by the counterparty. Thus, such an arrangement does not meet the conditions for offset. PP163. This Statement does not provide special treatment for so-called "synthetic instrument," which are groups of separate financial instruments that are acquired and held to emulate the characteristics of other financial instruments. For example, long-term debt with floating interest rates 6.105 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
201. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 combined with an interest rate swap that involves receiving floating payments and making fixed payments synthesizes a fixed rate long-term debt. Each of the individual financial instruments that together constitute a 'synthetic instrument' represents a contractual right or obligation with its own terms and conditions and each may be transferred or settled separately. Each financial instrument is exposed to different risks. Therefore, if a financial instrument in a 'synthetic instrument' is an asset and another is a liability, they are not 
 offset and presented in statement of financial position on a net basis unless they meet the criteria for offsetting in paragraph 121. DISCLOSURE (Paragraphs 130-150) Classes of financial instruments and level of disclosure PP164. Paragraph 130 requires Bank Indonesia to group financial instruments into classes that are appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments. The classes described in paragraph 130 are determined by Bank Indonesia. PP165. In determining classes of financial instruments, Bank Indonesia, at a minimum, shall: (a) distinguish instruments measured at amortised cost from those measured at fair value through revaluation reserves. (b) treat as a separate class or classes those financial instruments outside the scope of this Statement. PP166. Bank Indonesia decides, in the light of its circumstances, how much detail it provides to satisfy the requirements of this Statement, how much emphasis it places on different aspects of these requirements and how it aggregates information to display the overall picture without combining information with different characteristics. It is necessary to strike a balance between overburdening financial statements with excessive detail that may not assist users of financial statements and obscuring important information as a result of too much aggregation. For example, Bank Indonesia shall not obscure important information by including it among a large amount of insignificant details. Similarly, Bank Indonesia shall not disclose information that is so aggregated that it obscures important differences between individual transactions or associated risks. Other Disclosures - Accounting Policies PP167. Paragraph 139 requires the disclosure of the basis (bases) of the measurements that are used in preparing the financial statements and other 6.106 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
202. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 accounting policies used that are relevant to an understanding of the financial statements. For financial instruments, such disclosure may include: (a) for financial assets or financial liabilities designated as at fair value through the revaluation reserves: (i) the nature of the financial assets or financial liabilities designated by Bank Indonesia as at fair value through the revaluation reserves; (ii) the criteria for so designating such financial assets or financial liabilities on initial recognition; and (iii) how Bank Indonesia has satisfied the conditions in paragraphs 42, 44, 49, 50, and 62 for such designation. For instruments designated in accordance with paragraphs 42 and 44(a) of the definition of financial assets or financial liabilities at fair value through the revaluation reserves, such disclosure includes a narrative description of the circumstances underlying the measurement or recognition inconsistency that would otherwise arise. For instruments designated in accordance with paragraph 44(b) of the definition of financial assets and financial liabilities at fair value through the revaluation reserves, the disclosure includes a narrative description of how designation at fair value through the revaluation reserves is consistent with documented risk management or strategy of financial instruments management. (b) whether regular purchases and sales of financial assets are accounted for at the trade date or at settlement date (see paragraph 11). (c) if the allowance account is used to reduce the carrying amount of financial assets that are impaired by credit losses: (i) the criteria for determining when the carrying amount of the impaired financial assets is directly reduced (or, in the case of a reversal of a write-down, directly increased) and when the allowance account is used; and (ii) the criteria for writing off amounts charged to the allowance account against the carrying amount of impaired financial assets (see paragraph 137). (d) how net gains or net losses on each category of financial instruments are determined (see paragraph 138(a)), for example, whether the net gains or losses on items measured at fair value through the revaluation reserves include interest income. (e) the criteria used by Bank Indonesia to determine whether there is objective evidence that an impairment loss has occurred (see paragraph 138(e)). 6.107 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
203. PKAK 06 : POLICY-RELATED FINANCIAL INSTRUMENTS ----------------------------------------------------------------------1 2 3 4 5 6 7 8 9 10 (f) if the terms of financial assets that would otherwise be past due or impaired have been renegotiated, the accounting policies for the financial assets that are the subject of the renegotiated terms. PKAK 02: Presentation of Financial Statements, paragraph 68, also requires Bank Indonesia to disclose, in the summary of significant accounting policies or other notes, the judgements, apart from those involving estimations, that Bank Indonesia management has made in the process of applying accounting policies and that have the most significant effects on the amounts recognised in the financial statements. 6.108 ---------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
204. STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 07 NON-UNIQUE TRANSACTIONS
205. FOREWORD The Steering Board of the Bank Indonesia Financial Accounting Policies Preparatory Committee (“KAKBI Committee”) approved and adopted the Statement of Financial Accounting Policy No. 07 (on non-unique transactions) at its meeting on 20 December 2013. Jakarta, 20 December 2013 KAKBI Committee Steering Board Rosita Uli Sinaga Mubarakah Chair Deputy Chair Hendar Member Ahmad Hidayat Member Sidharta Utama Member Slamet Sugiri Member Chaerul Djakman Member Jan Hoesada Member Amir Abadi Jusuf Member Kusumaningsih Angkawijaya Member Dwi Martani Member
206. TABLE OF CONTENTS Paragraph INTRODUCTION ....................................................................................... 01-09 Background ..................................................................................................01-04 Objective ............................................................................................................ 05 Scope ............................................................................................................06-08 Definitions ......................................................................................................... 09 REGULATION ........................................................................................... 10-12 TRANSITIONAL PROVISIONS ........................................................................ 13 EFFECTIVE DATE ......................................................................................... 14
207. PKAK 07 : NON-UNIQUE TRANSACTIONS -----------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 STATEMENT OF FINANCIAL ACCOUNTING POLICY NUMBER 07 Non-Unique Transactions Statement of Financial Accounting Policy (PKAK) 07 consists of paragraphs 1-14. All of the paragraphs in this Statement are equally binding. The paragraphs that are printed in bold type and italics set out the main principles. PKAK 07 must be read in the context of regulation objectives and in conjunction with the Fundamental Principle for the Preparation and Presentation of Bank Indonesia Financial Statements. PKAK 01: Accounting Policies describes the basis for the selection and application of accounting policies when no specific PKAK are available. INTRODUCTION Background (a) (b) (c) (d) 01. Transactions at Bank Indonesia include: conventional and unique transactions; conventional and non-unique transactions; sharia and unique transactions; and sharia and non-unique transactions. 02. The accounting treatment for sharia transactions in Bank Indonesia, whether unique or non-unique, is beyond the scope of the Bank Indonesia PKAK. Bank Indonesia management can use the rules set out in PKAK 01 to establish accounting arrangements for Sharia transactions until such time as the Bank Indonesia Financial Accounting Policies Committee issues a specific PKAK governing the transactions. 03. The accounting treatments for conventional and unique transactions in Bank Indonesia are set out in PKAK 01: Accounting Policies, PKAK 02: Presentation of Financial Statements, PKAK 03: The Effects of Changes in Foreign Exchange Rates, PKAK 04: Gold, PKAK 05: Currency in Circulation, and PKAK 06: Policy-related Financial Instruments. 04. Conventional and non-unique transactions in Bank Indonesia are in principle not different from similar transactions in commercial entities. Consequently, the accounting treatment of conventional and non-unique transactions refers to the General Accounting Standards. 7.1 ----------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
208. PKAK 07 : NON-UNIQUE TRANSACTIONS -----------------------------------------------------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Objective 05. The objective of this Statement is to govern conventional and nonunique transactions in Bank Indonesia. Scope 06. This Statement governs the accounting treatment for conventional and non-unique transaction in Bank Indonesia. 07. This Statement does not apply to the accounting treatment for conventional and non-unique transactions that are governed by PKAK 01: Accounting Policies, PKAK 02: Presentation of Financial Statements, PKAK 03: The Effects of Changes in Foreign Exchange Rates, PKAK 04: Gold, PKAK 05: Currency in Circulation, and PKAK 06: Policy-related Financial Instruments, except for matters that are excluded by the said PKAK. 08. This Statement does not apply to the accounting treatment for Sharia transactions. Definitions 09. The following terms are used in this Statement: Statement of Financial Accounting Policies (PKAK) is regulation of financial accounting policies, including recognition, measurement, presentation and disclosure for each class of financial transactions and events that affect the financial condition of Bank Indonesia. Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements (PDP2LK) is a conceptual framework for determining, among other things, the objectives, elements, qualitative characteristics, basic concepts, assumptions, and limitations in the preparation and presentation of Bank Indonesia financial statements, including guidelines for the adoption of generally applicable financial accounting standards. General Accounting Standards (GAS) are statements and interpretations issued by the Indonesian Institute of Accountants‟ Financial Accounting Standards Board. 7.2 ----------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
209. PKAK 07 : NON-UNIQUE TRANSACTIONS -----------------------------------------------------1 Sharia transaction is a transaction conducted by Bank Indonesia in 2 compliance with sharia principles. 3 4 Conventional transaction is a transaction that does not meet the 5 definition of a Sharia transaction. 6 7 Unique transaction is: 8 i. a type of transaction that is only found in Bank Indonesia as the 9 central bank; or 10 ii. a type of transaction that is also conducted by other entities, but 11 which are conducted by Bank Indonesia with different objectives. 12 13 REGULATION 14 15 10. All Bank Indonesia conventional and non-unique 16 transactions shall refer to the GAS, unless otherwise stipulated in this 17 Statement. The arrangements in the GAS are not intended to apply to 18 elements that are not material. 19 20 11. If the GAS govern matters that are also specifically 21 regulated by PKAK 02: Presentation of Financial Statements, the 22 accounting arrangement used are those set out in PKAK 02: 23 Presentation of Financial Statements. 24 25 12. The following are some examples of the application of paragraph 11 26 of this Statement: 27 i. The contents of interim financial statements prepared in accordance 28 with the GAS on interim financial statements shall refer to the 29 components of complete financial statements in accordance PKAK 02; 30 ii. All of the rules on the statement of income under the GAS shall be 31 applied to the Bank Indonesia financial statements in accordance with 32 the arrangement on the statement of surplus deficit as set out in PKAK 33 02; 34 iii. Rules related to other comprehensive income, for example, rules on 35 income arising from actuarial gains or losses in the GAS on employee 36 compensation or revaluation surplus on the GAS on fixed assets, are 37 presented in Bank Indonesia financial statements as revaluation 38 reserves in accordance with PKAK 02: Presentation of Financial 39 Statements. 7.3 ----------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
210. PKAK 07 : NON-UNIQUE TRANSACTIONS -----------------------------------------------------1 2 3 4 5 6 7 8 9 10 TRANSITIONAL PROVISIONS 13. This Statement shall apply prospectively. This Statement applies to all outstanding balances arising from Bank Indonesia conventional and nonunique transactions as per the effective date. EFFECTIVE DATE 14. This Statement shall be effective counting from such date as may be stipulated by Bank Indonesia Board of Governors‟ Regulation. 7.4 ----------------------------------------------------------------------------Bank Indonesia Financial Accounting Policies Committee
211. Membership of the Bank Indonesia Financial Accounting Policies Committee Bank Indonesia As at 31 December 2014 Committee Chair Hendar Steering Board Rosita Uli Sinaga Mubarakah Hendar Ahmad Hidayat Sidharta Utama Slamet Sugiri Chaerul Djakman Jan Hoesada Amir Abadi Jusuf Kusumaningsih Angkawijaya Dwi Martani Technical Team M . Agung Hastowo Yan Rahadian Danil S. Handaya Yakub Patricia Aucky Pratama Ratna Wardhani Sylvia Veronica Siregar Liana Lim Yanto Kamarudin Yasir Teuku Radja Syahnan Teguh Supangkat J.B.P. Simandjuntak Saptadi Teddy Pirngadi Desiyanti Any Pudjiastuti Arief Chair Deputy Chair Member Member Member Member Member Member Member Member Member Technical Team Coordinator Technical Team Coordinator Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor Drafter Drafter Drafter Drafter
212. Abdul Rahman Tamin Haris Effendi Edi Yusuf Toto Sugiarto Tonny Indarto Linda Kurniawati Arlin Karlina Catherin Y .M.Tambunan Giri Koorniaharta Hari Widodo Erwin Gunawan Hutapea Merywati Riky Dimiyati Pretty Pratita Hotmina R. Purba Deddy Satria Senni Adhitatri Restu Sutarko Nuryanti Niniek Cahyaningrum Retno Widati Taufik Hidayat Aria Farahmita Eko Wisnu Warsitosunu Widya Perwitasari Agustin Setya Ningrum Aisyah Dian Pratiwi Rahfiani Khairurizka M. Malik Annisa Febriana Ayu Nadia Hanum Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Drafter Secretariat Sugiarto Tonny Indarto Linda Kurniawati Arlin Karlina Catherin Y.M.Tambunan Florence N.Rumkorem Chair Member Member Member Member Member
213. Duties and Authority of the Bank Indonesia Financial Accounting Policies Committee (“KAKBI Committee”) in Preparing the Bank Indonesia Financial Accounting Policies A. Duties of the Steering Board: 1. To evaluate and determine financial accounting issues that need to be brought to the next due process. 2. To establish a schedule for the drafting of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies. 3. To provide independent input on the studies undertaken by the technical team concerning the fundamental financial accounting policy issues. 4. To provide independent input on the drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies, as prepared by the technical team. 5. To approve the drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies, as submitted by the technical team for presentation at a limited hearing. 6. To present the drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies at the limited hearing. 7. To approve the final versions of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies, as prepared by the technical team.
214. 8 . To act as resource person on dissemination of Board of Governors‟ Regulations on the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies. 9. To provide views, opinions, and recommendations in order to improve and / or revoke the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies. 10. To provide final opinions to the enquiries from external auditors and other parties involved with Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies. 11. To provide written interpretation on Statements of Financial Accounting Policies. B. Authority of the Steering Board: 1. To reject or approve the next due process on the initiation of financial accounting policy issue. 2. To provide guidance and correction at every due process. 3. To approve the drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies for presentation at the limited hearing. 4. To approve the final versions of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies for submission to the Board of Governors of Bank Indonesia. 5. To provide written interpretation on Statements of Financial Accounting Policies
215. C . Duties of Technical Team: 1. To conduct a study on financial accounting policy issue, as approved by the Steering Board. 2. To prepare academic papers and drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies as well as the interpretation on Statements of Financial Accounting Policies by consulting with the Steering Board for obtaining input. 3. To revise such academic papers and drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies, as well as the interpretation on Statements of Financial Accounting Policies based on input from the Steering Board. 4. To submit the academic papers and drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies, as well as the interpretation on Statements of Financial Accounting Policies to the Steering Board for approval. 5. To forward the drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies, as approved by the Steering Board, to the Audit Board of the Republic of Indonesia. 6. To submit the drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies to the Steering Board for presentation at the limited hearing. 7. To organise the limited hearing. 8. To conduct final discussions on the drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia
216. Financial Statements and Statements of Financial Accounting Policies based on the outcome of the limited hearing and consultations with the Steering Board . 9. To submit the final drafts of the Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies to the Steering Board for approval. 10. To organise the dissemination of Fundamental Principles for the Preparation and Presentation of Bank Indonesia Financial Statements and Statements of Financial Accounting Policies.
217. Bank Indonesia Financial Accounting Policies Committee Bank Indonesia , Building C, 10th Floor, Jl. MH Thamrin, No.2, Jakarta Pusat, 10350 Phone: +6221-29817018 / 29817150; Fax: +6221-34830210, Email: kpkakbi@bi.go.id