Accounting Treatment for Bond and Stock Sale and Purchase Transactions by Securities Companies

To:

1. Board of Directors and Board of Commissioners of Securities Companies;
2. Board of Directors of the Indonesia Stock Exchange (PT Bursa Efek Indonesia);
3. Board of Directors of the Indonesia Central Securities Depository (PT Kustodian Sentral Efek Indonesia);
4. Board of Directors of the Indonesia Stock Guarantee Clearing Corporation (PT Kliring Penjaminan Efek Indonesia);
5. Indonesian Securities Companies Association (Asosiasi Perusahaan Efek Indonesia);
6. Indonesian Investment Managers Association (Asosiasi Manajer Investasi Indonesia);
7. Financial Services Sector Accountants Forum (Forum Akuntan Sektor Jasa Keuangan); and
8. Indonesian Public Accountants Institute (Institut Akuntan Publik Indonesia).
   At your location.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 24 /SEOJK.04/2022 CONCERNING ACCOUNTING TREATMENT FOR BOND AND STOCK SALE AND PURCHASE TRANSACTIONS BY SECURITIES COMPANIES

In order to implement the mandate of Article 5 paragraph (3) of Financial Services Authority Regulation Number 20/POJK.04/2021 concerning the Preparation of Financial Statements of Securities Companies (State Gazette of the Republic of Indonesia Year 2021 Number 223, Supplement to the State Gazette of the Republic of Indonesia Number 6725), in conjunction with Financial Services Authority Circular Letter Number 25/SEOJK.04/2021 concerning Guidelines for Accounting Treatment of Securities Companies, and in order to provide clarity and legal certainty as well as guidelines for securities companies regarding the accounting treatment of bond and stock sale and purchase transactions, it is necessary to regulate the accounting treatment for bond and stock sale and purchase transactions by securities companies as follows:

I. GENERAL PROVISIONS
In this Financial Services Authority Circular Letter, the following terms are defined:
a. Securities Company is a party that conducts business activities as an underwriter of securities, securities broker, and/or investment manager. b. Bond and Stock Sale and Purchase Transaction is a financial asset transaction involving bonds and stocks transferred by the party transferring the financial asset (seller) to the party receiving the transfer (buyer) and which has met the derecognition criteria as required by Financial Accounting Standards.
c. Financial Accounting Standards, hereinafter abbreviated as SAK, are statements and interpretations issued by the Financial Accounting Standards Board of the Indonesian Accountants Association and the Sharia Financial Accounting Standards Board of the Indonesian Accountants Association, as well as regulations in the field of capital market laws for entities conducting capital market activities.

II. APPLICATION OF ACCOUNTING TREATMENT FOR BOND AND STOCK SALE AND PURCHASE TRANSACTIONS

1. Securities Companies conducting Bond and Stock Sale and Purchase Transactions must apply the accounting treatment provisions as regulated in this Financial Services Authority Circular Letter.
2. In applying the accounting treatment provisions for Bond and Stock Sale and Purchase Transactions as regulated in this Financial Services Authority Circular Letter, Securities Companies must also pay attention to the principles regulated in SAK.
3. In the event that there is accounting treatment related to Bond and Stock Sale and Purchase Transactions not regulated in this Financial Services Authority Circular Letter, such unregulated accounting treatment must follow SAK.
4. In the event that there are changes to SAK and/or new SAK after the implementation of this Financial Services Authority Circular Letter, the accounting treatment for Bond and Stock Sale and Purchase Transactions by Securities Companies must follow the latest SAK provisions, unless otherwise stated by the Financial Services Authority.

III. RECOGNITION OF BOND AND STOCK SALE AND PURCHASE TRANSACTIONS

1. In Bond and Stock Sale and Purchase Transactions, at initial recognition:
   a. Securities Companies determine whether the Securities Company is a principal or an agent for each specific good or service promised to customers in accordance with applicable SAK provisions; and b. Securities Companies recognize financial assets or financial liabilities in the statement of financial position when they become a party to the contractual provisions of such instruments.
2. Securities Companies record every transaction for the purchase and sale of financial assets on a regular basis for each category of financial assets on the transaction date starting from the binding date. The transaction date, or trading date according to applicable SAK, is the date on which the Securities Company commits to selling or buying a financial asset.
3. Securities Companies pay attention to provisions regarding the timing of obligations for Bond and Stock Sale and Purchase Transactions as regulated by applicable laws and regulations. The timing of such obligations is tested for consistency with the transaction date provisions as referred to in SAK.

IV. ACCOUNTING TREATMENT FOR TRANSFERRED FINANCIAL ASSETS

1. In the event that Securities Companies conduct Bond and Stock Sale and Purchase Transactions, the treatment of transferred financial assets traded is first subject to a derecognition test in accordance with applicable SAK.
2. In the event that, based on the test results, the transfer of transferred financial assets meets the qualification for derecognition:
   a. the party transferring the financial assets stops recognizing such financial assets in their financial statements as regulated in applicable SAK; and b. the party receiving the transferred financial assets recognizes such financial assets in their financial statements, as regulated in applicable SAK.
3. In the event that, based on the test results, the transfer of transferred financial assets does not meet the qualification for derecognition, such transfer is treated in accordance with applicable SAK.

V. ACCOUNTING TREATMENT FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES ARISING FROM BOND AND STOCK SALE AND PURCHASE TRANSACTIONS

1. At initial recognition, financial assets or financial liabilities arising from Bond and Stock Sale and Purchase Transactions are classified and measured in accordance with applicable SAK.
2. At subsequent measurement, Securities Companies measure financial assets or financial liabilities arising from Bond and Stock Sale and Purchase Transactions based on the classification of such financial assets or financial liabilities in accordance with applicable SAK.
3. In the event that Securities Companies intend to offset financial assets and financial liabilities arising from Bond and Stock Sale and Purchase Transactions and present their net amount in the statement of financial position, such Securities Companies must conduct a test to determine that such offsetting has met the requirements in accordance with applicable SAK.

VI. ACCOUNTING TREATMENT FOR REVENUE FROM BOND AND STOCK SALE AND PURCHASE TRANSACTIONS

1. Bond and Stock Sale and Purchase Transactions through agency transactions.
   In the event that, based on the test results as referred to in Section III item 1 letter a:
   a. Securities Companies act as agents and fulfill execution obligations, Securities Companies recognize commission revenue in the amount of net consideration retained by the Securities Company in accordance with applicable SAK. The net consideration referred to is the amount after paying other parties consideration received in exchange for goods or services provided by such parties. b. Securities Companies act as principals and fulfill execution obligations, Securities Companies recognize revenue in the gross amount of consideration estimated to be entitled in exchange for specific goods or services transferred.

2. Recognition of revenue from Bond and Stock Sale and Purchase Transactions owned by Securities Companies.
   In the event that Bond and Stock Sale and Purchase Transactions owned by Securities Companies are conducted, Securities Companies recognize revenue from such transactions, which includes investment results in the form of consideration received from investment activities and/or profits (losses) from bond and stock trading transactions conducted for their own interests, including unrealized profits (losses) on bonds and stocks measured at fair value through profit or loss.

VII. ACCOUNTING TREATMENT FOR OTHER MATTERS
Accounting treatment for other matters determined based on agreements, such as the settlement of failure events, refers to applicable SAK.

VIII. CLOSING
The provisions in this Financial Services Authority Circular Letter shall take effect on the date of establishment.

Established in Jakarta on December 12, 2022

EXECUTIVE HEAD
CAPITAL MARKET SUPERVISOR
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,

signed,
INARNO DJAJADI