Paper Vinge Gusvrika Elanda 07102016
ANALSIS OF PRESENTATION AND DISCLOSURE OF REVALUATION ASSET
BASED ON TAX REGULATION IN THE FINANCIAL STATEMENT 2015
VINGE GUSVRIKA ELANDA1 and DWI MARTANI
Universitas Indonesia
This study analyzes the implications of regulatory revaluation issued in 2015, PMK
233/PMK.03/2015. This study discusses the presentation and disclosure of revaluation of
fixed assets in the financial statements and analyze the factors that affect the company's
decision to revalue assets. This study uses companies that have been listed on the Indonesia
Stock Exchange in 2015. The results showed 128 companies are do the asset revaluation and
the most of them do the revaluation of fixed assets for land and buildings. Companies do the
revaluation for accounting purposes are 37.5%. This study proves that the fixed asset
intensity and firm size has a significant influence over company’s decision to do the
revaluation.
Keywords :
Revaluation of assets, tax revaluation, fixed assets, disclosure of revaluation, presentation of
revaluation.
I.
INTRODUCTION
Revaluation of assets is a reassessment of the value of the assets owned by the
company. Revaluation use when there is a difference between the recorded value of the
company with real value in the marketplace. With assets revaluation, the value of the assets
recorded by the company will reflect the actual value. However, treatment of revaluation of
assets in Indonesia can be done either in accounting or tax. Revaluation or reappraisal is
usually performed on fixed assets or investment properties.
According to accounting, the revaluation of fixed assets is recognized either excess or
less the difference between the value of assets recorded in the company with a fair value in
the market. Revaluation of fixed assets and investment property is a model in the assessment
or selection of accounting policies.
Besides accounting, a problem concerning the revaluation are also regulated in the
Income Tax Act Article 4 paragraph (1) letter m stating that the excess of the revaluation of a
fixed assets is the object of income tax. Unlike the accounting that recognizes the difference
more or less than the difference between the results of revaluation, the tax only recognizes
the excess over the revaluation of fixed assets. In other words, only the excess (gain) on
revaluation of fixed assets are taxed. Further rules regarding the revaluation of fixed assets in
the tax regulated in PMK 79/PMK.08/2008.
PMK 79/PMK.03/2008 accommodated in the old regulation that is PSAK 16 in 1994,
accounting standards mention that revaluation is not allowed for assessment under the
1 This paper is part of a thesis written Vinge Gusvrika Elanda with supervisor Dr. Dwi
Martani, the course, the Faculty of Economics and Business, University of Indonesia
acquisition price, but a deviation from this provision may be carried out under the provisions
of the Government. In 2007, these accounting standards is change. Changes in accounting
standards have led to differences between the tax treatment of fixed assets and accounting. To
encourage domestic economy and provide incentives to companies, the government issued a
new policy that PMK 191/PMK.010/2015. In the new policy tariff charged only 3% -6%,
which was upgraded to PMK 233 / PMK.03 / 2015.
Past research related to the revaluation of assets, performed by Kristi (2012) which
describes the impact of income tax for companies that do a revaluation. The study obtained
results that the revaluation of the company on the basis of the need to improve the financial
performance of the company. In addition, previous research related to factors that affect the
company's decision revaluation, conducted by Piera (2007) who found that the company in
the Swiss tend to revalue fixed assets because of the leverage and international stakeholders.
While more research is done and Su Seng (2010) suggest that the listed company in New
Zealand to make the size of the company and the intensity of the assets, as the factors that
drive the company revalued.
It distinguishes with previous studies is the research carried out on the basis of PMK
233 in 2015, while previous research refers to the PMK 79 in 2008. The earlier study also
only conduct an analysis of the implications of the corporate income tax on revaluation what
companies do. Meanwhile, this research focuses on how the revaluation is presented and
disclosed in financial statements, as well as the factors on what basis the company revalued.
In the current study found that the new regulations raise the enthusiasm of companies
to revalue their fixed assets. Based on the number of samples studied, companies that
revaluation is only at 39.4% only. However, from these results, most companies do a
revaluation for the majority of fixed assets. Where in previous regulations, companies are not
allowed to perform only for partial revaluation of fixed assets, it should be the overall fixed
assets. In addition, the study also found that the intensity and size of the company's fixed
assets is a significant factor in the company's decision revalued.
This concise manuscript consists of five parts, the first part is an introduction that
explains the research background. Then, the second part consists of the theoretical basis and
development of hypotheses, the third part is a research methodology that consists of a
framework of research and data and samples used. Furthermore, the fourth section is an
analysis and discussion of research results, and the fifth part is the conclusion, limitations,
suggestions and implications of the research.
II.
THEORETICAL AND HYPOTHESIS
The accounting treatment for the revaluation of assets described in the revised IAS
16, 2015. The Company can select how measurement after the initial recognition of fixed
assets, one of which is the revaluation model in order to provide more relevant information
for decision-making companies.
According to IAS 16 (2015), the revaluation conducted by the company should be
conducted regularly so that the carrying amount and the amount determined using the fair
value is not materially different at the end of the period. Where if the carrying amount of the
assets of the revaluation company increases will be recognized in other comprehensive
income and accumulated in equity in revaluation surplus parts. However, if the carrying
amount over the company revalued assets decreased, the impairment is recognized in profit
or loss or other comprehensive income during the decline does not exceed the value of the
credit balance of the revaluation surplus for that asset.
If the company did revaluation of an asset, then the whole class or group in companyowned assets should be revalued. This is to avoid selective revaluation of these assets and to
avoid reporting using a mix of historical cost and fair value for the same asset classes in the
financial statements. Means of the same group that has the same uses and same
characteristics. As an example of the same classes asset are land, land and buildings,
machinery, motor vehicles, aircraft, office equipment, and more.
In accounting treatment, the length of time revaluation of assets depending on
changes in the value of fixed assets. If the carrying value of fixed assets of the company to
differ materially, then the fixed asset revaluation should be done, so that the value of fixed
assets reflects the actual market value. Changes in fair value are very significant influence in
the company revalued its frequency. If within one year after the last time revaluation of the
value of these assets changed significantly, the asset should be revalued, but if it does not
change significantly, the revaluation process is not necessary.
It's about the revaluation of assets was also discussed in the Financial Accounting
Standards for Entities Without Public Accountability (SAK ETAP). In general, the
revaluation in SAK ETAP is not allowed, because SAK ETAP using the revaluation of assets
using the cost or price exchange. Just as IAS 16, 1994, the revaluation allowed by the
provisions of the Government and the difference between the value of fixed assets after the
revaluation of the carrying amount recognized in equity revaluation surplus parts.
In addition, the revaluation of assets in accounting is also set out in IAS 13 on
Investment Property, which in IAS known as the revaluation of the fair value model.
Investment property in accordance with accounting standards are the property of the
company or tenant (whether in the form of land or building, or both) to earn rentals or capital
appreciation, or both, and not for production or supply of goods/services for administrative
purposes and not for sale in everyday business activities.
The right to property owned by the lessee under an operating lease may be classified
and accounted for as an investment property if and only if the property is defined as an
investment property, and the tenant uses the fair value of the property.
In IAS 13 par. 32A companies are allowed to choose accounting policies that will be used by
the company to apply to all investment properties, can use the cost model or fair value model.
However, if the right to property owned by the lessee under an operating lease is classified as
investment property as described earlier, then the company can not choose the form of the
cost model of accounting policy, the company can only use the fair value model as its
accounting policy. Gains or losses on the results of the change in fair value of investment
property are recognized in profit or loss in the period the change occurs. Revaluation of
assets performed by the company is used to reflect the current asset value (Martani, 2012).
According to the Tax Revaluation of Assets
According to Law No. 36 of 2008 on Income Tax (Income Tax Law) Article 4
paragraph 1 states that the revaluation is the one that made the object of taxation. The object
itself is an income tax or additional or an increase in economic benefits derived by the
taxpayer. Revaluation taxable object is mentioned in Article 4 paragraph (1) letter m, which
is "the difference from revaluation of assets". In the tax revaluation referred to as over-gap on
the revaluation of the assets of a company. As the name suggests, the revaluation of the tax
value of the excess is only recognized on the revaluation of company assets.
The next problem is made clear through the revaluation of Income Tax Law Article 19, stated
that the authorities of the revaluation of assets or the discrepancy between the elements of
cost and income for their price development is striking is the Minister of Finance. Minister of
Finance makes a regulation to implement its own rates on the excess over a revaluation of the
company's assets. Rates set out in the Minister of Finance can not exceed the highest tax rates
in the Income Tax Law Article 17 paragraph (1).
Further rules regarding the revaluation of the assets company's is set in the PMK 79
(2008). The types of assets that can be revalued in the PMK 79 (2008) is all tangible fixed
assets including land use rights that have certificates and buildings, as well as all fixed assets
tangible excluding land located in Indonesia, owned and used to obtain, collect and preserve
income into the taxable income. Revaluation according to this taxation can not be done
before five years, starting from the fixed asset revaluation made last time. The revaluation
must be based on the fair value of the applicable does valued back and performed by expert
assessors services or obtain permission from the Government.
To encourage companies revaluation, the Government reset regulations regarding
revaluation of fixed assets for tax purposes of the previous regulations. Through the new
government regulations that PMK 191/PMK.010/2015, the Government intends to give relief
to companies that make application of the revaluation of fixed assets in 2015 and 2016.
There are some differences between the PMK 79 (2008) with PMK 191 (2015), the
taxpayer is able to perform revaluation is a corporate taxpayer in the country, Permanent
Establishment (BUT), an individual taxpayer who does the bookkeeping, including taxpayer
which has obtained a license to keep books in English and the currency of the US dollar, as
well as the taxpayer who is still in a period of 5 years from the revaluation regulated in PMK
79/PMK.03/2008. Another difference is that fixed assets can be revalued, where the PMK
191 (2015) the company may revalue some or all fixed assets are located in Indonesia, owned
and used for obtaining, collecting and maintaining the income which is taxable income. In
addition, tariffs applied in PMK 191 (2015) only 3% -6%, lower than in the previous
regulations which amounted to 10%.
Regulations regarding the revaluation for tax purposes do change by the end of 2015
become PMK 233/PMK.03/2015. PMK 233 (2015) is in force for the public to understand
the rules regarding the revaluation of fixed assets as well as adding some article previously
contained in the PMK 191 (2015).
Technical Bulletin 11 About Assets Revaluation
Issues raised in technical bulletins 11 is about five things, including relationships
revaluation of fixed assets between tax and accounting, approval DJP for submission of
application for revaluation of fixed assets of the company, the accounting treatment of final
income tax charged to revaluation of fixed assets, current tax and deferred results from
revaluation of fixed assets, and the tax rate to measure the impact of deferred taxes as a result
of the revaluation of fixed assets (either for tax purposes or for the purposes of accounting
and taxation).
Companies are allowed to choose a destination revaluation is only for tax purposes,
only for accounting purposes or for tax and accounting purposes. Companies that perform
only asset revaluation for tax purposes it should get approval from the DJP within a certain
time. DJP has the authority to reject or accept the proposal on the revaluation. For companies
that have received approval from the DJP in doing the revaluation, if the company revalued
assets only for tax purposes, then the current tax expense (3% of the excess of revaluation)
arising from these events are recognized in profit or loss. While on the revaluation event
temporary differences arise because the tax base is larger than the amount recorded in
accounting.
However, if the company revalued for tax and accounting purposes, the amount of
taxes paid is recognized in other comprehensive income and accumulated in equity in the
revaluation surplus. In contrast to the revaluation for tax purposes only, a revaluation is done
for tax and accounting purposes this does not have the temporary differences between the
carrying amounts for accounting with their respective tax bases.
Hypothesis
The lenders use accounting information to analyze the company's financial position
and assess the risk of the company when the lender will approve the loan to be granted. One
major concern of creditors is to reduce or attenuate the risk of the guarantee offered by the
company's assets in case of bankruptcy, which is positively correlated with the leverage of
the company. Revaluation will increase the book value of total assets that would give effect
to the creditors that the company's financial ratios well. With the report's strong financial
position will have an impact on the confidence of creditors that the company can pay the
debt. The preparation of this hypothesis was based on previous research conducted by (Piera,
2007) and (Seng and Su, 2010).
H1: Companies with high leverage level have a high probability to revalue fixed assets
Borrowing capacity of a company depends not only on the level of leverage but also
on the company's ability to repay debt. The decline in cash flow from operations may cause
lenders to be concerned with the company's liquidity. An Australian study by (Cotter and
Zimmer, 1995) argues that a revaluation may help to convince debtholders about the
company's ability to pay the debt through ownership potential value of the company's assets
are largely based on market value. Therefore, the revaluation undertaken will help the
company to repay the loan by the company. Then arranged the hypothesis in this study using
a previous study conducted by (Seng and Su, 2010), namely
H2: Companies that decreased cash flow operating activities more likely to have a high
probability to revalue fixed assets
Research conducted (Lin and Peasnel, 2000b) found a positive relationship between
the intensity of fixed assets by the manager's decision to conduct the revaluation, as well
(Tay, 2009) who found the influence of the revaluation of assets with fixed asset intensity.
Given these findings, this study aims to find a significant effect of the intensity of the fixed
assets of the company will influence the manager's decision to revaluated. Preparation of the
hypothesis in this study are based on research conducted (Seng and Su, 2010), so to
demonstrate empirically the findings in the study then developed a hypothesis, namely
H3: Companies that have a high intensity of fixed assets that have a high probability to
revalue fixed assets
Government price controls more focused on large companies than in small companies
because large companies that are considered to have greater freedom to the observance of the
rules, and are more likely to take a leadership role price (Lin and Peasnell, 2000b). To reduce
the adverse political influence, companies tend to avoid income/profit companies that are too
high (Standish and Ung, 1982). The revaluation of an asset can be an effective way for
companies to reduce profits through increased depreciation charges on the rise in assets that
were revalued (Lin and Peasnell, 2000b). Wherein the larger the total assets of the company
it will be very likely do the revaluation of fixed assets. The preparation of this hypothesis is
based on previous research conducted by (Seng and Su, 2010) stating that the company has a
large size will tend to revalue fixed assets of the company. So the hypothesis in this study,
namely
H4: Companies with large size has a high probability to revalue fixed assets
III.
RESEARCH METHODOLOGY
Research framework
This study aimed to analyze the presentation and disclosure of asset revaluation in the
financial statements. Asset revaluation can be done both in terms of taxes and accounting.
The study will analyze any company that does revaluation of fixed assets and investment
property in 2015 and how the characteristics industry of companies that conduct the
revaluation. Of all companies that conduct the revaluation will be explained the field of their
respective companies. In addition, this study also analyzes what kinds of assets reevaluated
by the company, whether the company revalued for some assets or the fixed assets of the
company and how the company presents and reveal the revaluation in the financial
statements. In addition to the above problems, the study also aims to analyze the factors that
influence the company's decision to carry out a revaluation. Based on the research objectives
that have been put forward and based on the results of previous studies as described in the
previous chapter, then developed a framework of thought as in Figure 1.
Figure 1. Research Framework
Leverage
Declining Cash
FlowFrom Operations
Fixed Asset Intensity
Firm Size
Policy of Revaluation
The formation of this model is based on research conducted (Seng and Su, 2010) to
make adjustments in the calculation of leverage, the use of the calculations in the study
(Piera, 2007). The logistic regression equation in this study are:
Yi = α + β1LEVi + β2DCFFOi + β3INTATi + β4SIZEi +i
Where is the explanation of variables:
Yi
:
Revaluation of fixed assets of companies listed on the Stock Exchange in
2015 (using a dummy, one for the revaluation and zero for which no
Revaluation)
LEVi
:
The level of leverage measured by the ratio of total debt to total financial
assets
DCFFOi :
Decrease in operating cash flow of the company is measured from the
ratio of decrease in cash flow from operating activities of the company in
year t to the year t-1 to the decline in operating cash flow in year t
INTATi
:
The intensity or the proportion of fixed assets owned by the company
measured from the ratio of total fixed assets to total assets
SIZEi
:
The size of the company with natural logarithma measured from natural
logarithma on total assets in year t
In this study, which is the dependent variable is revaluation. The dependent variable
using a dummy variable that is measured with the number 1 if the company revalued assets in
2015, and 0 if the company does not perform a revaluation of assets in 2015. While the
independent variables used is based on research and Su Seng (2010) which is the level the
company's leverage, the decline in cash flow from operating activities of the company, the
intensity of the fixed assets of the company, and the size of the company (firm size).
Data and Sample
Data from this study are all listed company listed in Indonesia Stock Exchange until
2015. The number of companies listed on the Stock Exchange in 2015 was 525 companies
with various types of industries.
The sampling method the researchers did was by purposive sampling, with the
characteristics of sampling are companies listed on the Stock Exchange until 2015 and
availability of data is a company's financial statements were audited in 2015.
IV.
DISCUSSION AND ANALYSIS
Sample Selection
Based on the sample selection criteria in this study, acquired 525 companies listed on
the Stock Exchange and 406 companies that have financial statements 2015 have been
audited. Table 1 shows the translation of the sample to be studied.
Table 1 Data and Sample
No.
Description
1
Company listed on the Stock Exchange
2
The number of samples of the company that has
first and second criteria
Less: company data is incomplete (the third
criterion)
The number of samples to be studied
Company
525
406
(83)
325
Descriptive statistics
From table 2 it is known that there are 39.4% of the total sample used, revalued
assets. This shows that not many companies are using the revaluation model in measuring
assets, both for fixed assets or investment properties. Of the 128 companies that perform the
revaluation, there are companies that for a long time using the revaluation model in
accounting policies, those new companies using the revaluation model in 2015 (changing the
cost model into the revaluation model). A company of revalued assets in 2015 comprised of
various sectors or industries that can be seen in Table 3.
Table 2. Descriptive Statistics Businesses Doing Revaluation
Company
Percentage
Not doing Revaluation
197
60.6
Doing Revaluation
128
39.4
Total
325
100
In Table 3 is known that some companies that revaluation is a company engaged in
the financial sector, the banking company that dominates (24 companies). Although the
amount of fixed assets held by the banking company less than the total fixed assets of another
company (only 3.27%).
Table 3 Types of Industrial Businesses Doing Revaluation 2015
No.
Industry
1
Consumer Staples :
Food Product
Beverage
Personal Product
Energy :
Oil, Gas, and Fuel
Finance :
Insurance
Banks
Consumer Finance
Capital Market
Materials :
Metals and Mining
Construction Materials
Chemical
Paper and Forest Product
Container and Packaging
2
3
4
5
Infrastructure dan Transportation :
Construction and Technique
Trading and Distributor
Machine Equipment
Highway, Airports, and Seaport
Airlines
Electric Equipment
Commercial services and supplies
Road and Rail
Building Product
Real Estate
Shipping
Communication Service :
Variety of Communication
Wireless Communication
Information Technology :
Software dan Internet Service
6
7
% Total
Asset
13.84%
13.57%
0.11%
0.16%
13.38%
13.38%
6.94%
1.64%
3.27%
0.94%
1.09%
16.96%
6.17%
2.16%
3.94%
1.98%
2.71%
20.06%
2.63%
0.99%
0.77%
0.68%
1.47%
1.35%
2.14%
1.87%
1.57%
5.74%
0.85%
13.32%
7.42%
5.90%
1.09%
1.09%
Amount of Company
Revaluation
Listed
14
60
11
38
1
4
2
5
2
39
2
33
38
90
11
15
24
42
2
15
1
17
21
69
8
26
1
6
4
16
4
9
4
12
23
138
4
17
1
12
2
4
2
7
1
1
1
7
2
7
1
11
1
6
7
50
1
13
6
12
4
6
2
6
1
11
1
3
Percentage
Total Revaluation
11%
23%
29%
25%
40%
2%
5%
6%
30%
42%
73%
57%
13%
6%
16%
30%
31%
17%
25%
44%
33%
18%
17%
24%
8%
50%
29%
100%
14%
29%
9%
17%
14%
8%
5%
50%
67%
33%
1%
9%
33%
continued
8
9
Health :
Health care providers
Others :
Automobile and auto Components
Media
Hotel, restaurant dan leisure
Household Goods
0.71%
0.71%
13.71%
1.67%
2.93%
2.10%
1.61%
3
3
20
6
2
4
3
15
9
89
11
14
7
5
2%
16%
20%
33%
22%
55%
14%
57%
60%
Textiles, apparel, luxury goods
Specialty Retail
Distributors
2.19%
2.26%
0.95%
2
2
1
17
11
6
Total
100%
128
523
12%
18%
17%
100
%
Then, related to any type of asset revaluation by the company can be seen in Table 4.
According to Table 4 it is known that 55% of companies revalued their fixed assets for most
companies. From a part of the revaluation of fixed assets, 30% of the revaluation of fixed
assets of the company is land and buildings. Then 25% of the revaluation of fixed assets by
the company is the only form of land. From Table 4 it can be concluded that the majority of
companies do a revaluation of land assets.
Table 4. Type Asset revaluation
Numbe
r
Various Asset Revaluation
Company
Percentage
Company
1
2
3
4
All of Fixed Assets
Most of Fixed Assets
Land
Land and others
Building
Building and others
Land and Building
Land, building and others
Others
Investment Property
28
71
18
2
2
7
21
8
13
26
3
128
Investment Property and Fixed Asset
Total
Most of Fixed
Assets
22%
55%
25%
3%
3%
10%
30%
11%
18%
20%
2%
Due to differences in the presentation of the revaluation of assets of the company, this
research is intended to show how many companies are doing only asset revaluation for tax
purposes, only for accounting purposes, and for tax and accounting purposes. From table 5 it
can be concluded that most of the companies doing the revaluation for accounting purposes.
Companies that perform revaluation for accounting purposes mostly revalued for investment
properties. While companies are revalued for tax purposes as well as the revaluation for tax
and accounting purposes most have not yet received approval from the DJP on request
revaluation.
Table 5. Purpose Revaluation Applied
Company Percentage
Tax Only
Accounting Only
35
48
27.3
37.5
Cumulative
Percentage
27.3
64.8
Tax and Accounting
Total
45
128
35.2
100
100.0
From Table 6, it is known that the average company that does revaluation amounted
0.39. The standard deviation of the revaluation itself has a value of 0.49 and a revaluation of
the dependent variable in this study, with a minimum value for the revaluation is 0 and the
maximum value for the revaluation is 1. While the average of the highest independent
variable in the variable SIZE with a value of 29.87 but this variable has the smallest standard
deviation of only 1.99 with a short range of values that is 20.76 to 39.10.
Table 6. Descriptive Statistics
Variable
Mean
REV
LEV
DCFFO
INTSY
SIZE
0.39
11.93
-0.31
6.14
29.87
Std.
Deviation
0.49
10.76
7.54
2.63
1.99
Minimum Maximum
0.00
0.02
-70.31
-2.73
20.76
1.00
76.80
44.60
9.93
39.10
Multocoloniarity Test
According to the table 7 can be concluded that there is a significant correlation
between the intensity of the revaluation of fixed assets of the company with the size of the
company. The significant value of fixed assets revaluation with the intensity and size of the
company that is equal to 0.000 0.05.
Based on the results of Pearson correlation (**) note that a significant relationship
between the variables is not strong, because the result is
BASED ON TAX REGULATION IN THE FINANCIAL STATEMENT 2015
VINGE GUSVRIKA ELANDA1 and DWI MARTANI
Universitas Indonesia
This study analyzes the implications of regulatory revaluation issued in 2015, PMK
233/PMK.03/2015. This study discusses the presentation and disclosure of revaluation of
fixed assets in the financial statements and analyze the factors that affect the company's
decision to revalue assets. This study uses companies that have been listed on the Indonesia
Stock Exchange in 2015. The results showed 128 companies are do the asset revaluation and
the most of them do the revaluation of fixed assets for land and buildings. Companies do the
revaluation for accounting purposes are 37.5%. This study proves that the fixed asset
intensity and firm size has a significant influence over company’s decision to do the
revaluation.
Keywords :
Revaluation of assets, tax revaluation, fixed assets, disclosure of revaluation, presentation of
revaluation.
I.
INTRODUCTION
Revaluation of assets is a reassessment of the value of the assets owned by the
company. Revaluation use when there is a difference between the recorded value of the
company with real value in the marketplace. With assets revaluation, the value of the assets
recorded by the company will reflect the actual value. However, treatment of revaluation of
assets in Indonesia can be done either in accounting or tax. Revaluation or reappraisal is
usually performed on fixed assets or investment properties.
According to accounting, the revaluation of fixed assets is recognized either excess or
less the difference between the value of assets recorded in the company with a fair value in
the market. Revaluation of fixed assets and investment property is a model in the assessment
or selection of accounting policies.
Besides accounting, a problem concerning the revaluation are also regulated in the
Income Tax Act Article 4 paragraph (1) letter m stating that the excess of the revaluation of a
fixed assets is the object of income tax. Unlike the accounting that recognizes the difference
more or less than the difference between the results of revaluation, the tax only recognizes
the excess over the revaluation of fixed assets. In other words, only the excess (gain) on
revaluation of fixed assets are taxed. Further rules regarding the revaluation of fixed assets in
the tax regulated in PMK 79/PMK.08/2008.
PMK 79/PMK.03/2008 accommodated in the old regulation that is PSAK 16 in 1994,
accounting standards mention that revaluation is not allowed for assessment under the
1 This paper is part of a thesis written Vinge Gusvrika Elanda with supervisor Dr. Dwi
Martani, the course, the Faculty of Economics and Business, University of Indonesia
acquisition price, but a deviation from this provision may be carried out under the provisions
of the Government. In 2007, these accounting standards is change. Changes in accounting
standards have led to differences between the tax treatment of fixed assets and accounting. To
encourage domestic economy and provide incentives to companies, the government issued a
new policy that PMK 191/PMK.010/2015. In the new policy tariff charged only 3% -6%,
which was upgraded to PMK 233 / PMK.03 / 2015.
Past research related to the revaluation of assets, performed by Kristi (2012) which
describes the impact of income tax for companies that do a revaluation. The study obtained
results that the revaluation of the company on the basis of the need to improve the financial
performance of the company. In addition, previous research related to factors that affect the
company's decision revaluation, conducted by Piera (2007) who found that the company in
the Swiss tend to revalue fixed assets because of the leverage and international stakeholders.
While more research is done and Su Seng (2010) suggest that the listed company in New
Zealand to make the size of the company and the intensity of the assets, as the factors that
drive the company revalued.
It distinguishes with previous studies is the research carried out on the basis of PMK
233 in 2015, while previous research refers to the PMK 79 in 2008. The earlier study also
only conduct an analysis of the implications of the corporate income tax on revaluation what
companies do. Meanwhile, this research focuses on how the revaluation is presented and
disclosed in financial statements, as well as the factors on what basis the company revalued.
In the current study found that the new regulations raise the enthusiasm of companies
to revalue their fixed assets. Based on the number of samples studied, companies that
revaluation is only at 39.4% only. However, from these results, most companies do a
revaluation for the majority of fixed assets. Where in previous regulations, companies are not
allowed to perform only for partial revaluation of fixed assets, it should be the overall fixed
assets. In addition, the study also found that the intensity and size of the company's fixed
assets is a significant factor in the company's decision revalued.
This concise manuscript consists of five parts, the first part is an introduction that
explains the research background. Then, the second part consists of the theoretical basis and
development of hypotheses, the third part is a research methodology that consists of a
framework of research and data and samples used. Furthermore, the fourth section is an
analysis and discussion of research results, and the fifth part is the conclusion, limitations,
suggestions and implications of the research.
II.
THEORETICAL AND HYPOTHESIS
The accounting treatment for the revaluation of assets described in the revised IAS
16, 2015. The Company can select how measurement after the initial recognition of fixed
assets, one of which is the revaluation model in order to provide more relevant information
for decision-making companies.
According to IAS 16 (2015), the revaluation conducted by the company should be
conducted regularly so that the carrying amount and the amount determined using the fair
value is not materially different at the end of the period. Where if the carrying amount of the
assets of the revaluation company increases will be recognized in other comprehensive
income and accumulated in equity in revaluation surplus parts. However, if the carrying
amount over the company revalued assets decreased, the impairment is recognized in profit
or loss or other comprehensive income during the decline does not exceed the value of the
credit balance of the revaluation surplus for that asset.
If the company did revaluation of an asset, then the whole class or group in companyowned assets should be revalued. This is to avoid selective revaluation of these assets and to
avoid reporting using a mix of historical cost and fair value for the same asset classes in the
financial statements. Means of the same group that has the same uses and same
characteristics. As an example of the same classes asset are land, land and buildings,
machinery, motor vehicles, aircraft, office equipment, and more.
In accounting treatment, the length of time revaluation of assets depending on
changes in the value of fixed assets. If the carrying value of fixed assets of the company to
differ materially, then the fixed asset revaluation should be done, so that the value of fixed
assets reflects the actual market value. Changes in fair value are very significant influence in
the company revalued its frequency. If within one year after the last time revaluation of the
value of these assets changed significantly, the asset should be revalued, but if it does not
change significantly, the revaluation process is not necessary.
It's about the revaluation of assets was also discussed in the Financial Accounting
Standards for Entities Without Public Accountability (SAK ETAP). In general, the
revaluation in SAK ETAP is not allowed, because SAK ETAP using the revaluation of assets
using the cost or price exchange. Just as IAS 16, 1994, the revaluation allowed by the
provisions of the Government and the difference between the value of fixed assets after the
revaluation of the carrying amount recognized in equity revaluation surplus parts.
In addition, the revaluation of assets in accounting is also set out in IAS 13 on
Investment Property, which in IAS known as the revaluation of the fair value model.
Investment property in accordance with accounting standards are the property of the
company or tenant (whether in the form of land or building, or both) to earn rentals or capital
appreciation, or both, and not for production or supply of goods/services for administrative
purposes and not for sale in everyday business activities.
The right to property owned by the lessee under an operating lease may be classified
and accounted for as an investment property if and only if the property is defined as an
investment property, and the tenant uses the fair value of the property.
In IAS 13 par. 32A companies are allowed to choose accounting policies that will be used by
the company to apply to all investment properties, can use the cost model or fair value model.
However, if the right to property owned by the lessee under an operating lease is classified as
investment property as described earlier, then the company can not choose the form of the
cost model of accounting policy, the company can only use the fair value model as its
accounting policy. Gains or losses on the results of the change in fair value of investment
property are recognized in profit or loss in the period the change occurs. Revaluation of
assets performed by the company is used to reflect the current asset value (Martani, 2012).
According to the Tax Revaluation of Assets
According to Law No. 36 of 2008 on Income Tax (Income Tax Law) Article 4
paragraph 1 states that the revaluation is the one that made the object of taxation. The object
itself is an income tax or additional or an increase in economic benefits derived by the
taxpayer. Revaluation taxable object is mentioned in Article 4 paragraph (1) letter m, which
is "the difference from revaluation of assets". In the tax revaluation referred to as over-gap on
the revaluation of the assets of a company. As the name suggests, the revaluation of the tax
value of the excess is only recognized on the revaluation of company assets.
The next problem is made clear through the revaluation of Income Tax Law Article 19, stated
that the authorities of the revaluation of assets or the discrepancy between the elements of
cost and income for their price development is striking is the Minister of Finance. Minister of
Finance makes a regulation to implement its own rates on the excess over a revaluation of the
company's assets. Rates set out in the Minister of Finance can not exceed the highest tax rates
in the Income Tax Law Article 17 paragraph (1).
Further rules regarding the revaluation of the assets company's is set in the PMK 79
(2008). The types of assets that can be revalued in the PMK 79 (2008) is all tangible fixed
assets including land use rights that have certificates and buildings, as well as all fixed assets
tangible excluding land located in Indonesia, owned and used to obtain, collect and preserve
income into the taxable income. Revaluation according to this taxation can not be done
before five years, starting from the fixed asset revaluation made last time. The revaluation
must be based on the fair value of the applicable does valued back and performed by expert
assessors services or obtain permission from the Government.
To encourage companies revaluation, the Government reset regulations regarding
revaluation of fixed assets for tax purposes of the previous regulations. Through the new
government regulations that PMK 191/PMK.010/2015, the Government intends to give relief
to companies that make application of the revaluation of fixed assets in 2015 and 2016.
There are some differences between the PMK 79 (2008) with PMK 191 (2015), the
taxpayer is able to perform revaluation is a corporate taxpayer in the country, Permanent
Establishment (BUT), an individual taxpayer who does the bookkeeping, including taxpayer
which has obtained a license to keep books in English and the currency of the US dollar, as
well as the taxpayer who is still in a period of 5 years from the revaluation regulated in PMK
79/PMK.03/2008. Another difference is that fixed assets can be revalued, where the PMK
191 (2015) the company may revalue some or all fixed assets are located in Indonesia, owned
and used for obtaining, collecting and maintaining the income which is taxable income. In
addition, tariffs applied in PMK 191 (2015) only 3% -6%, lower than in the previous
regulations which amounted to 10%.
Regulations regarding the revaluation for tax purposes do change by the end of 2015
become PMK 233/PMK.03/2015. PMK 233 (2015) is in force for the public to understand
the rules regarding the revaluation of fixed assets as well as adding some article previously
contained in the PMK 191 (2015).
Technical Bulletin 11 About Assets Revaluation
Issues raised in technical bulletins 11 is about five things, including relationships
revaluation of fixed assets between tax and accounting, approval DJP for submission of
application for revaluation of fixed assets of the company, the accounting treatment of final
income tax charged to revaluation of fixed assets, current tax and deferred results from
revaluation of fixed assets, and the tax rate to measure the impact of deferred taxes as a result
of the revaluation of fixed assets (either for tax purposes or for the purposes of accounting
and taxation).
Companies are allowed to choose a destination revaluation is only for tax purposes,
only for accounting purposes or for tax and accounting purposes. Companies that perform
only asset revaluation for tax purposes it should get approval from the DJP within a certain
time. DJP has the authority to reject or accept the proposal on the revaluation. For companies
that have received approval from the DJP in doing the revaluation, if the company revalued
assets only for tax purposes, then the current tax expense (3% of the excess of revaluation)
arising from these events are recognized in profit or loss. While on the revaluation event
temporary differences arise because the tax base is larger than the amount recorded in
accounting.
However, if the company revalued for tax and accounting purposes, the amount of
taxes paid is recognized in other comprehensive income and accumulated in equity in the
revaluation surplus. In contrast to the revaluation for tax purposes only, a revaluation is done
for tax and accounting purposes this does not have the temporary differences between the
carrying amounts for accounting with their respective tax bases.
Hypothesis
The lenders use accounting information to analyze the company's financial position
and assess the risk of the company when the lender will approve the loan to be granted. One
major concern of creditors is to reduce or attenuate the risk of the guarantee offered by the
company's assets in case of bankruptcy, which is positively correlated with the leverage of
the company. Revaluation will increase the book value of total assets that would give effect
to the creditors that the company's financial ratios well. With the report's strong financial
position will have an impact on the confidence of creditors that the company can pay the
debt. The preparation of this hypothesis was based on previous research conducted by (Piera,
2007) and (Seng and Su, 2010).
H1: Companies with high leverage level have a high probability to revalue fixed assets
Borrowing capacity of a company depends not only on the level of leverage but also
on the company's ability to repay debt. The decline in cash flow from operations may cause
lenders to be concerned with the company's liquidity. An Australian study by (Cotter and
Zimmer, 1995) argues that a revaluation may help to convince debtholders about the
company's ability to pay the debt through ownership potential value of the company's assets
are largely based on market value. Therefore, the revaluation undertaken will help the
company to repay the loan by the company. Then arranged the hypothesis in this study using
a previous study conducted by (Seng and Su, 2010), namely
H2: Companies that decreased cash flow operating activities more likely to have a high
probability to revalue fixed assets
Research conducted (Lin and Peasnel, 2000b) found a positive relationship between
the intensity of fixed assets by the manager's decision to conduct the revaluation, as well
(Tay, 2009) who found the influence of the revaluation of assets with fixed asset intensity.
Given these findings, this study aims to find a significant effect of the intensity of the fixed
assets of the company will influence the manager's decision to revaluated. Preparation of the
hypothesis in this study are based on research conducted (Seng and Su, 2010), so to
demonstrate empirically the findings in the study then developed a hypothesis, namely
H3: Companies that have a high intensity of fixed assets that have a high probability to
revalue fixed assets
Government price controls more focused on large companies than in small companies
because large companies that are considered to have greater freedom to the observance of the
rules, and are more likely to take a leadership role price (Lin and Peasnell, 2000b). To reduce
the adverse political influence, companies tend to avoid income/profit companies that are too
high (Standish and Ung, 1982). The revaluation of an asset can be an effective way for
companies to reduce profits through increased depreciation charges on the rise in assets that
were revalued (Lin and Peasnell, 2000b). Wherein the larger the total assets of the company
it will be very likely do the revaluation of fixed assets. The preparation of this hypothesis is
based on previous research conducted by (Seng and Su, 2010) stating that the company has a
large size will tend to revalue fixed assets of the company. So the hypothesis in this study,
namely
H4: Companies with large size has a high probability to revalue fixed assets
III.
RESEARCH METHODOLOGY
Research framework
This study aimed to analyze the presentation and disclosure of asset revaluation in the
financial statements. Asset revaluation can be done both in terms of taxes and accounting.
The study will analyze any company that does revaluation of fixed assets and investment
property in 2015 and how the characteristics industry of companies that conduct the
revaluation. Of all companies that conduct the revaluation will be explained the field of their
respective companies. In addition, this study also analyzes what kinds of assets reevaluated
by the company, whether the company revalued for some assets or the fixed assets of the
company and how the company presents and reveal the revaluation in the financial
statements. In addition to the above problems, the study also aims to analyze the factors that
influence the company's decision to carry out a revaluation. Based on the research objectives
that have been put forward and based on the results of previous studies as described in the
previous chapter, then developed a framework of thought as in Figure 1.
Figure 1. Research Framework
Leverage
Declining Cash
FlowFrom Operations
Fixed Asset Intensity
Firm Size
Policy of Revaluation
The formation of this model is based on research conducted (Seng and Su, 2010) to
make adjustments in the calculation of leverage, the use of the calculations in the study
(Piera, 2007). The logistic regression equation in this study are:
Yi = α + β1LEVi + β2DCFFOi + β3INTATi + β4SIZEi +i
Where is the explanation of variables:
Yi
:
Revaluation of fixed assets of companies listed on the Stock Exchange in
2015 (using a dummy, one for the revaluation and zero for which no
Revaluation)
LEVi
:
The level of leverage measured by the ratio of total debt to total financial
assets
DCFFOi :
Decrease in operating cash flow of the company is measured from the
ratio of decrease in cash flow from operating activities of the company in
year t to the year t-1 to the decline in operating cash flow in year t
INTATi
:
The intensity or the proportion of fixed assets owned by the company
measured from the ratio of total fixed assets to total assets
SIZEi
:
The size of the company with natural logarithma measured from natural
logarithma on total assets in year t
In this study, which is the dependent variable is revaluation. The dependent variable
using a dummy variable that is measured with the number 1 if the company revalued assets in
2015, and 0 if the company does not perform a revaluation of assets in 2015. While the
independent variables used is based on research and Su Seng (2010) which is the level the
company's leverage, the decline in cash flow from operating activities of the company, the
intensity of the fixed assets of the company, and the size of the company (firm size).
Data and Sample
Data from this study are all listed company listed in Indonesia Stock Exchange until
2015. The number of companies listed on the Stock Exchange in 2015 was 525 companies
with various types of industries.
The sampling method the researchers did was by purposive sampling, with the
characteristics of sampling are companies listed on the Stock Exchange until 2015 and
availability of data is a company's financial statements were audited in 2015.
IV.
DISCUSSION AND ANALYSIS
Sample Selection
Based on the sample selection criteria in this study, acquired 525 companies listed on
the Stock Exchange and 406 companies that have financial statements 2015 have been
audited. Table 1 shows the translation of the sample to be studied.
Table 1 Data and Sample
No.
Description
1
Company listed on the Stock Exchange
2
The number of samples of the company that has
first and second criteria
Less: company data is incomplete (the third
criterion)
The number of samples to be studied
Company
525
406
(83)
325
Descriptive statistics
From table 2 it is known that there are 39.4% of the total sample used, revalued
assets. This shows that not many companies are using the revaluation model in measuring
assets, both for fixed assets or investment properties. Of the 128 companies that perform the
revaluation, there are companies that for a long time using the revaluation model in
accounting policies, those new companies using the revaluation model in 2015 (changing the
cost model into the revaluation model). A company of revalued assets in 2015 comprised of
various sectors or industries that can be seen in Table 3.
Table 2. Descriptive Statistics Businesses Doing Revaluation
Company
Percentage
Not doing Revaluation
197
60.6
Doing Revaluation
128
39.4
Total
325
100
In Table 3 is known that some companies that revaluation is a company engaged in
the financial sector, the banking company that dominates (24 companies). Although the
amount of fixed assets held by the banking company less than the total fixed assets of another
company (only 3.27%).
Table 3 Types of Industrial Businesses Doing Revaluation 2015
No.
Industry
1
Consumer Staples :
Food Product
Beverage
Personal Product
Energy :
Oil, Gas, and Fuel
Finance :
Insurance
Banks
Consumer Finance
Capital Market
Materials :
Metals and Mining
Construction Materials
Chemical
Paper and Forest Product
Container and Packaging
2
3
4
5
Infrastructure dan Transportation :
Construction and Technique
Trading and Distributor
Machine Equipment
Highway, Airports, and Seaport
Airlines
Electric Equipment
Commercial services and supplies
Road and Rail
Building Product
Real Estate
Shipping
Communication Service :
Variety of Communication
Wireless Communication
Information Technology :
Software dan Internet Service
6
7
% Total
Asset
13.84%
13.57%
0.11%
0.16%
13.38%
13.38%
6.94%
1.64%
3.27%
0.94%
1.09%
16.96%
6.17%
2.16%
3.94%
1.98%
2.71%
20.06%
2.63%
0.99%
0.77%
0.68%
1.47%
1.35%
2.14%
1.87%
1.57%
5.74%
0.85%
13.32%
7.42%
5.90%
1.09%
1.09%
Amount of Company
Revaluation
Listed
14
60
11
38
1
4
2
5
2
39
2
33
38
90
11
15
24
42
2
15
1
17
21
69
8
26
1
6
4
16
4
9
4
12
23
138
4
17
1
12
2
4
2
7
1
1
1
7
2
7
1
11
1
6
7
50
1
13
6
12
4
6
2
6
1
11
1
3
Percentage
Total Revaluation
11%
23%
29%
25%
40%
2%
5%
6%
30%
42%
73%
57%
13%
6%
16%
30%
31%
17%
25%
44%
33%
18%
17%
24%
8%
50%
29%
100%
14%
29%
9%
17%
14%
8%
5%
50%
67%
33%
1%
9%
33%
continued
8
9
Health :
Health care providers
Others :
Automobile and auto Components
Media
Hotel, restaurant dan leisure
Household Goods
0.71%
0.71%
13.71%
1.67%
2.93%
2.10%
1.61%
3
3
20
6
2
4
3
15
9
89
11
14
7
5
2%
16%
20%
33%
22%
55%
14%
57%
60%
Textiles, apparel, luxury goods
Specialty Retail
Distributors
2.19%
2.26%
0.95%
2
2
1
17
11
6
Total
100%
128
523
12%
18%
17%
100
%
Then, related to any type of asset revaluation by the company can be seen in Table 4.
According to Table 4 it is known that 55% of companies revalued their fixed assets for most
companies. From a part of the revaluation of fixed assets, 30% of the revaluation of fixed
assets of the company is land and buildings. Then 25% of the revaluation of fixed assets by
the company is the only form of land. From Table 4 it can be concluded that the majority of
companies do a revaluation of land assets.
Table 4. Type Asset revaluation
Numbe
r
Various Asset Revaluation
Company
Percentage
Company
1
2
3
4
All of Fixed Assets
Most of Fixed Assets
Land
Land and others
Building
Building and others
Land and Building
Land, building and others
Others
Investment Property
28
71
18
2
2
7
21
8
13
26
3
128
Investment Property and Fixed Asset
Total
Most of Fixed
Assets
22%
55%
25%
3%
3%
10%
30%
11%
18%
20%
2%
Due to differences in the presentation of the revaluation of assets of the company, this
research is intended to show how many companies are doing only asset revaluation for tax
purposes, only for accounting purposes, and for tax and accounting purposes. From table 5 it
can be concluded that most of the companies doing the revaluation for accounting purposes.
Companies that perform revaluation for accounting purposes mostly revalued for investment
properties. While companies are revalued for tax purposes as well as the revaluation for tax
and accounting purposes most have not yet received approval from the DJP on request
revaluation.
Table 5. Purpose Revaluation Applied
Company Percentage
Tax Only
Accounting Only
35
48
27.3
37.5
Cumulative
Percentage
27.3
64.8
Tax and Accounting
Total
45
128
35.2
100
100.0
From Table 6, it is known that the average company that does revaluation amounted
0.39. The standard deviation of the revaluation itself has a value of 0.49 and a revaluation of
the dependent variable in this study, with a minimum value for the revaluation is 0 and the
maximum value for the revaluation is 1. While the average of the highest independent
variable in the variable SIZE with a value of 29.87 but this variable has the smallest standard
deviation of only 1.99 with a short range of values that is 20.76 to 39.10.
Table 6. Descriptive Statistics
Variable
Mean
REV
LEV
DCFFO
INTSY
SIZE
0.39
11.93
-0.31
6.14
29.87
Std.
Deviation
0.49
10.76
7.54
2.63
1.99
Minimum Maximum
0.00
0.02
-70.31
-2.73
20.76
1.00
76.80
44.60
9.93
39.10
Multocoloniarity Test
According to the table 7 can be concluded that there is a significant correlation
between the intensity of the revaluation of fixed assets of the company with the size of the
company. The significant value of fixed assets revaluation with the intensity and size of the
company that is equal to 0.000 0.05.
Based on the results of Pearson correlation (**) note that a significant relationship
between the variables is not strong, because the result is