Subsidiaries (continued) Subsidiaries (continued)

B. Subsidiaries (continued) B. Subsidiaries (continued)

Special purpose entities (continued)

Reporting periods

! the entity has the majority of the residual or ownership risks of the SPE, or of its assets.

IFRS

The consolidated financial statements of the parent and the subsidiary are usually drawn up at the same reporting date. However, IFRS does permit the consolidation of subsidiary accounts drawn up

Indo GAAP Similar to IFRS. at a different reporting date, provided the difference between the reporting dates is not more than

US GAAP The consolidation of an SPE is required by its primary beneficiary only when the SPE meets the three months. Adjustments must be made for significant transactions that occur in the gap period. definition of a VIE and the primary beneficiary has a variable interest in the entity that will cause it to

Indo GAAP Similar to IFRS.

absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both.

US GAAP

Similar to IFRS.

Specific criteria permit the transfer of financial assets to an SPE that is not consolidated. The SPE must be a qualifying SPE (as defined) and the assets must be financial assets (as defined). The assets

must not arise from a structured transaction. REFERENCES: IFRS: IAS 27, SIC-12, IFRS 5. Indonesian GAAP: PSAK 4, PSAK 13. US GAAP: ARB 51, FAS 94, SAB 51, SAB 84, EITF 96-16,

FIN 46.

Subsidiaries excluded from consolidation IFRS

All subsidiaries are consolidated. If on acquisition a subsidiary meets the criteria to be classified as held for sale in accordance with IFRS 5, an entity will apply the presentation for assets held for sale

C. Investments in associates

(i.e. separate presentation of assets and liabilities to be disposed of), rather than normal line-by-line consolidation presentation.

Definition

Indo GAAP Subsidiaries should be excluded from consolidation if:

An associate is an entity over which the investor has significant influence that is, the power to – ! control is intended to be temporary because the subsidiary is acquired and held exclusively with a

IFRS

participate in, but not control, the definition of an associate’s financial and operating policies. view to its subsequent disposal in the near future, or

Participation in the entity’s financial and operating policies via representation on the entity’s board demonstrates significant influence. A 20% or more interest by an investor in an entity’s voting rights

! it operates under long term restrictions which significantly impair its ability to transfer funds to the

leads to a presumption of significant influence.

parent company (this condition is not required by IFRS),

Indo GAAP Similar to IFRS.

Unlike IFRS, there is no guidance on the presentation of assets held for sale.

Similar to IFRS. Does not include unincorporated entities, although these would generally be US GAAP

US GAAP

Subsidiaries excluded from the consolidation are those for which control does not rest with the

accounted for in a similar way.

majority owner. There is no longer an exclusion based on temporary control under US GAAP. Unconsolidated subsidiaries are generally accounted for using the equity method unless overcoming the presumption of significant influence.

Equity method IFRS

An investor must account for an investment in an associate using the equity method. The investor

Uniform accounting policies

presents its share of the associate’s profits and losses in the income statement. IFRS specifies that this must be shown at a post-tax level. The investor recognises in equity its share of changes in the

IFRS Consolidated financial statements must be prepared using uniform accounting policies for all of the associate’s equity that have not been recognised in the associate’s profit or loss. The investor must entities in a group. account for the difference, on acquisition of the investment, between the cost of the acquisition and

Indo GAAP Similar to IFRS. investor’s share of fair value of the net identifiable assets, as goodwill. The goodwill is included in the carrying amount of the investment.

US GAAP Similar to IFRS. The investor’s investment in the associate is stated at cost, plus its share of post-acquisition profits or losses, plus its share of post-acquisition movements in reserves, less dividends received. Losses that reduce the investment below zero are applied against any long-term interests that, in substance, form part of the investor’s net investment in the associate; for example, preference shares and long- term receivables and loans. Losses recognised in excess of the investor’s investment in ordinary

C. Investments in associates (continued)

D. Investments in joint ventures (continued)

Equity method (continued)

Types of joint venture

shares are applied to the other components in reverse order of seniority. Further losses are provided

IFRS

Distinguishes between three types of joint venture:

for as a liability only to the extent that the investor has incurred legal or constructive obligations to ! jointly controlled entities the arrangement is carried on through a separate entity (company or – make payments on behalf of the associate.

partnership);

Disclosure of information is required about the results, assets and liabilities of significant associates. ! jointly controlled operations each venturer uses its own assets for a specific project; and –

Indo GAAP Similar to IFRS. However, Indonesian GAAP does not specify whether share of associate’s profits ! jointly controlled assets a project carried on with assets that are jointly owned. – and losses in the income statement should be shown at pre or post tax level. Indonesian GAAP also

does not require disclosure of information about the results, assets and liabilities of significant Indo GAAP Only provides guidance for jointly controlled operations and jointly controlled assets, which is similar associates.

to IFRS. For jointly controlled entities, IFRS approach is in practice acceptable. US GAAP

Similar to IFRS.

US GAAP

Only refers to jointly controlled entities, where the arrangement is carried on through a separate corporate entity.

Impairment