Financial Reporting by Securities Companies

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 20 /POJK.04/2021
CONCERNING
FINANCIAL REPORTING BY SECURITIES COMPANIES
BY THE GRACE OF GOD THE ALMIGHTY,
THE COMMISSIONERS COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that securities companies need to present high-quality financial statements so as to provide accurate and comprehensive information for all interested parties, particularly investors; b. that to present high-quality financial statements by securities companies, it is necessary to improve the quality of transparency, openness, uniformity of preparation, and comparability of financial statements by securities companies that apply the principle of substance over form;
c. that applicable accounting standards and guidelines need to be continuously refined in line with the development of capital market transactions and products and harmonization with international accounting standards through the convergence program of Financial Accounting Standards to International Financial Reporting Standards;

d. that based on the considerations referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning Financial Reporting by Securities Companies;

Recalling:

1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING FINANCIAL REPORTING BY SECURITIES COMPANIES.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Securities Company is a party that conducts business activities as an underwriter of securities, securities broker-dealer, and/or investment manager.
2. Consolidated Financial Statements are the financial statements of a business group which include assets, liabilities, equity, income, expenses, and cash flows of the parent entity and subsidiary entities presented as a single economic entity.
3. Control is a condition when an investor is exposed to or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
4. 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 markets for entities conducting activities in the capital market.

CHAPTER II
PREPARATION OF FINANCIAL STATEMENTS
Article 2
(1) Financial statements of Securities Companies, both single-entity financial statements and Consolidated Financial Statements, for the purpose of submission to the public and to the Financial Services Authority, must be prepared based on SAK. (2) Securities Companies that are issuers or public companies in the preparation of financial statements must follow the provisions of this Financial Services Authority Regulation.

Article 3
(1) In the event that a Securities Company has Control over another entity, the Securities Company must consolidate the financial statements of that other entity in the Consolidated Financial Statements. (2) A Securities Company is deemed to have Control over another entity if the Securities Company has:
a. power over the investee; b. exposure or rights to variable returns from its involvement with the investee; and
c. the ability to use its power over the investee to affect the amount of investor returns.
(3) In the event that a Securities Company is an investment entity, the Securities Company is exempted from the obligation to consolidate the financial statements of its subsidiary entities as referred to in paragraph (1), except that the subsidiary entity is not an investment entity and its main purpose and activities are to provide services related to the investment activities of the investment entity.

Article 4
The Management of the Securities Company is responsible for the preparation of the Securities Company's financial statements.

Article 5
(1) In the preparation of financial statements as referred to in Article 2, Securities Companies must prepare financial statements based on the guidelines for accounting treatment of Securities Companies. (2) The guidelines for accounting treatment of Securities Companies as referred to in paragraph (1) constitute one of the accounting regulations in the field of capital markets. (3) The guidelines for accounting treatment of Securities Companies as referred to in paragraph (1) are established by the Financial Services Authority.

Article 6
In the event that there is accounting treatment not regulated in the guidelines for accounting treatment of Securities Companies as referred to in Article 5, such unregulated accounting treatment must follow SAK.

Article 7
(1) In the event that there are changes to SAK and/or new SAKs after the implementation of regulations concerning the guidelines for accounting treatment of Securities Companies established by the Financial Services Authority as referred to in Article 5 paragraph (3), the accounting treatment of Securities Companies must follow the latest SAK provisions, unless otherwise stated by the Financial Services Authority. (2) Other statements by the Financial Services Authority as referred to in paragraph (1) to fulfill the principle of openness and protect public interests are regulated by a Financial Services Authority Regulation.

Article 8
(1) The preparation of financial statements by Securities Companies as referred to in Articles 2 through 7 applies to fiscal years starting on or after January 1, 2022.
(2) Securities Companies may implement the provisions of this Financial Services Authority Regulation earlier.
(3) In the event that a Securities Company implements earlier as referred to in paragraph (2), the Securities Company must disclose the early implementation of the provisions of this Financial Services Authority Regulation in the notes to the financial statements.

CHAPTER III
ADMINISTRATIVE SANCTIONS
Article 9
(1) Any party that violates the provisions as referred to in Article 2, Article 3 paragraph (1), Article 4, Article 5 paragraph (1), Article 6, Article 7 paragraph (1), and Article 8 paragraph (3) shall be subject to administrative sanctions. (2) Sanctions as referred to in paragraph (1) are also imposed on parties who cause the occurrence of violations as referred to in paragraph (1). (3) Sanctions as referred to in paragraph (1) and paragraph (2) are imposed by the Financial Services Authority. (4) Administrative sanctions as referred to in paragraph (1) consist of:
a. written warning; b. fines in the form of an obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business license; f. cancellation of approval; and/or g. cancellation of registration.
(5) Administrative sanctions as referred to in paragraph (4) letters b, c, d, e, f, or g may be imposed with or without prior imposition of administrative sanctions in the form of a written warning as referred to in paragraph (4) letter a. (6) Administrative sanctions in the form of fines as referred to in paragraph (4) letter b may be imposed alone or together with the imposition of administrative sanctions as referred to in paragraph (4) letters c, d, e, f, or g. (7) The procedure for imposing sanctions as referred to in paragraph (3) is carried out in accordance with applicable regulations.

Article 10
In addition to administrative sanctions as referred to in Article 9 paragraph (4), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 11
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 9 paragraph (4) and specific actions as referred to in Article 10 to the public.

CHAPTER IV
TRANSITIONAL PROVISIONS
Article 12
At the time this Financial Services Authority Regulation comes into force, the preparation of financial statements by Securities Companies for financial reporting periods before January 1, 2022 refers to the latest SAK.

CHAPTER V
CLOSING PROVISIONS
Article 13
At the time this Financial Services Authority Regulation comes into force:
a. Decision of the Head of the Capital Market and Financial Institution Supervisory Board Number Kep-689/BL/2011 dated December 30, 2011 concerning Guidelines for Accounting Treatment of Securities Companies along with Regulation Number VIII.G.17 which is its appendix, and b. Financial Services Authority Regulation Number 1/POJK.04/2020 concerning Financial Reporting by Securities Companies (State Gazette of the Republic of Indonesia Year 2020 Number 1, Supplement to the State Gazette of the Republic of Indonesia Number 6452), are repealed and declared invalid.

Article 14
This Financial Services Authority Regulation comes into force on the date of its promulgation.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Established in Jakarta on September 20, 2021
CHAIRMAN OF THE COMMISSIONERS COUNCIL
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on September 21, 2021
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2021 NUMBER 223

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 20/POJK.04/2021
CONCERNING
FINANCIAL REPORTING BY SECURITIES COMPANIES

I. GENERAL
Securities Companies play an important role in the transaction mechanism in the capital market, a role reflected in the types of activities that can be carried out by Securities Companies, namely as underwriters of securities, securities broker-dealers, and/or investment managers. The importance of the role undertaken by Securities Companies must be followed by responsibility and accountability. One form of accountability for management and openness of information for stakeholders is the obligation of Securities Companies to prepare and submit financial statements. In 2011, Bapepam and LK issued Regulation Number VIII.G.17 concerning Guidelines for Accounting Treatment of Securities Companies, which aims to serve as a guide for Securities Companies in preparing financial statements. The provisions contained in the Guidelines for Accounting Treatment of Securities Companies are prepared based on Financial Accounting Standards and other relevant regulations in effect at the time of drafting the 2011 Guidelines for Accounting Treatment of Securities Companies.

One of the impacts of the convergence of Financial Accounting Standards to International Financial Reporting Standards is that current Financial Accounting Standards are more transaction-oriented. In 2017, one of the Financial Accounting Standards that served as the basis for drafting the Guidelines for Accounting Treatment of Securities Companies changed, namely Financial Accounting Standards Statement 71 concerning Financial Instruments, replacing Financial Accounting Standards Statement 55 (revised 2015): Financial Instruments: Recognition and Measurement, which became effective on January 1, 2020. In addition, there are 2 other Financial Accounting Standards Statements that were also ratified in 2017, namely Financial Accounting Standards Statement 72 concerning Revenue from Contracts with Customers and Financial Accounting Standards Statement 73 concerning Leases, which must be applied by all entities (including Securities Companies) on January 1, 2020.

With the massive changes in Financial Accounting Standards since the convergence of Financial Accounting Standards to International Financial Reporting Standards stage 2 and having a significant impact on the Guidelines for Accounting Treatment of Securities Companies, while the provisions in the Guidelines for Accounting Treatment of Securities Companies still use previous Financial Accounting Standards, the Guidelines for Accounting Treatment of Securities Companies have become irrelevant and inflexible against the dynamic development of SAK. With the fact that Financial Accounting Standards are general guidelines that must be followed by Securities Companies in preparing financial statements, this has the potential to cause problems regarding legal certainty, investor protection, and inefficiency in the cost of preparing financial statements.

Seeing these conditions and to improve the comparability of financial statements by Securities Companies that apply the principle of substance over the form and to provide a legal basis for Securities Companies in preparing financial statements in accordance with the latest provisions of Financial Accounting Standards, it is necessary to regulate provisions concerning the preparation of financial statements by Securities Companies based on the latest SAK.

II. ARTICLE BY ARTICLE
Article 1
Clearly stated.

Article 2
Clearly stated.

Article 3
Paragraph (1)
Clearly stated.

Paragraph (2)
Letter a
The term "power" refers to the existing right that gives the current ability to direct relevant activities.

Letter b
Clearly stated.

Letter c
Clearly stated.

Paragraph (3)
The term investment entity refers to an entity that:

1. obtains funds from one or more investors for the purpose of providing those investors with investment management services;
2. makes a commitment to investors that its business objective is to invest funds solely to obtain returns from capital appreciation, investment income, or both; and
3. measures and evaluates the performance of all its investments based on fair value.

Article 4
The term "Management of the Securities Company" refers to all members of the Board of Directors and Board of Commissioners of the Securities Company as regulated in regulations concerning the obligation of periodic report submission by Securities Companies.

Article 5
Clearly stated.

Article 6
Clearly stated.

Article 7
Paragraph (1)
The SAK referred to in these provisions 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.

Paragraph (2)
Clearly stated.

Article 8
Paragraph (1)
Clearly stated.

Paragraph (2)
The term "early implementation" refers to Securities Companies implementing the provisions in this Financial Services Authority Regulation earlier than the effective date.
Example:
The provisions in this Financial Services Authority Regulation are applied in the preparation of financial statements ending before January 1, 2022.

Paragraph (3)
Clearly stated.

Article 9
Clearly stated.

Article 10
The term "specific actions" includes, among others, orders to restate financial statements in accordance with the provisions as regulated in this Financial Services Authority Regulation.

Article 11
Clearly stated.

Article 12
Clearly stated.

Article 13
Clearly stated.

Article 14
Clearly stated.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6725