OJK Regulation No. 35/POJK.04/2020 on Business Valuation and Presentation of Business Valuation Reports in the Capital Market

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 35 /POJK.04/2020
CONCERNING
BUSINESS VALUATION AND PRESENTATION OF BUSINESS VALUATION REPORTS IN THE CAPITAL MARKET BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY Considering: a. that in order to harmonize the standards or guidelines for valuation applicable to the valuer profession in the capital market, it is necessary to adjust to the development of legislation and the valuer profession standards; b. that the regulations related to the Guidelines for Valuation and Presentation of Business Valuation Reports in the Capital Market, with implementation or use in current valuation practice, need to be replaced with a Financial Services Authority Regulation on Business Valuation and Presentation of Business Valuation Reports in the Capital Market;
c. that based on considerations as referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on Business Valuation and Presentation of Business Valuation Reports in the Capital Market;
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:
   Decree: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING BUSINESS VALUATION AND PRESENTATION OF BUSINESS VALUATION REPORTS IN THE CAPITAL MARKET.
   CHAPTER I
   GENERAL PROVISIONS
   Article 1
   In this Financial Services Authority Regulation, the following terms are defined as:
3. Valuation is the work process to provide a written opinion on the economic value of a valuation object.
4. Valuer is an individual who, with their expertise, carries out Valuation activities in the capital market.
5. Business Valuer is a Valuer who carries out business valuation activities as referred to in the Financial Services Authority Regulation regarding Valuers who carry out activities in the capital market.
6. Property Valuer is a Valuer who carries out property Valuation activities as referred to in the Financial Services Authority Regulation regarding Valuers who carry out activities in the capital market.
7. Business Valuation is the work process to provide a written opinion on the Business Valuation object as referred to in the Financial Services Authority Regulation regarding Valuers who carry out activities in the capital market.
8. Professional Valuation Assignment is an assignment received by the Valuer from the assignor to carry out Valuation on an object, the purpose of Valuation, and a specific date on which the Valuer bases their opinion, which is presented in the Valuation Report.
9. Party is an individual, company, joint venture, association, or organized group.
10. Value is the estimated price desired by the seller and/or buyer for a good or service and is the amount of economic benefits based on market value that will be obtained from the Valuation object on the Valuation Date.
11. Valuation Date is the date on which the Value, Valuation result, or calculation of economic benefits is stated.
12. Basis of Value is an explanation and/or definition of the type of Value being investigated based on certain criteria.
13. Value Premise is the Value assumption related to a transaction condition that can be used on the Valuation object.
14. Book Value is:
    a. the result of capitalization of the acquisition cost of assets, minus accumulated depreciation, depletion, amortization, or impairment as recorded in the financial statements; or b. the difference between total assets minus total liabilities of the company as recorded in the financial statements.
15. Net Asset Value is the total market value of assets minus the total market value of liabilities.
16. Market Value is the estimated amount of money that can be obtained from the exchange of an asset or liability on the Valuation Date, between a buyer interested in buying and a seller interested in selling, in an arm's length transaction, which is marketed properly, where both Parties act based on their understanding, caution, and without coercion.
17. Assumption is something considered to happen, including facts, conditions, or circumstances that may affect the Valuation object or the valuation approach and its reasonableness, which has been analyzed by the Business Valuer as part of the Valuation process.
18. Valuation Approach is a way to estimate Value using one or more valuation methods.
19. Asset Approach is a Valuation Approach based on the historical financial statements of the Valuation object that have been audited, by adjusting all assets and liabilities to Market Value in accordance with the Value Premise used in the Business Valuation.
20. Market Approach is a Valuation Approach by comparing the Valuation object with other comparable and similar objects for which transaction price or offer information is available.
21. Income Approach is a Valuation Approach by converting the economic benefits or income estimated to be generated by the Valuation object with a certain discount rate.
22. Valuation Method is a specific way or series of ways to carry out Valuation.
23. Business Interest is ownership in a company, including participation in a company, securities, other financial assets, and intangible assets.
24. Capitalization Factor is all types of ratios used to convert income into a Value.
25. Capitalization of Income Method is a Valuation Method based on an income considered to represent the future capability of a company or Business Interest being valued, divided by a capitalization rate or multiplied by a Capitalization Factor, resulting in an indication of the Value of the company or Business Interest.
26. Business Valuation Report is a written report created by the Business Valuer containing the Business Valuer's opinion on the Valuation object and presenting information about the Valuation process.
27. Business Valuation Report Date is the date the Business Valuation Report is signed by the Business Valuer.
28. Expert is a person who has expertise and qualifications in a specific field outside the scope of Valuation activities and does not work at a public Valuation service office.
29. Holding Company is a company whose majority of income or all income comes from participation in other companies.
30. Discount for Lack of Control is a specific amount or percentage that is a reduction from the Value of an equity as a reflection of the lack of control level over the Valuation object.
31. Discount for Lack of Marketabilities is a specific amount or percentage that is a reduction from the Value of an equity as a reflection of the lack of liquidity of the Valuation object.
32. Going Concern is a condition reflecting a business that is operating or under construction, or a premise in Valuation, where the Business Valuer considers that a company will continue its operations continuously.
33. Capitalization is:
    a. the conversion of net cash flow or other net income, whether actual or estimated, over a certain period equivalent to the Value of assets on a specific date; or b. the recognition of a capital expenditure.
34. Premium for Control is a specific amount or percentage that is an addition to the Value of an equity as a reflection of the level of control over the Valuation object.
35. Investment Capital is the amount of long-term debt and equity in a company.
36. Capitalization Rate is the divisor amount used to convert income into Value.
37. Rate of Return is the amount of profit or loss and/or change in value realized or expected from an investment expressed as a percentage.
38. Discount Rate is a Rate of Return to convert future value to present value reflecting the time value of money and uncertainty regarding the realization of economic income.
39. Net Cash Flow is the amount of cash that:
    a. is available after meeting cash needs for operational activities; b. is cash flow available to providers of capital consisting of debt and equity; and
    c. is free from the obligation to maintain current operations and to anticipate company growth.
40. Terminal Value is the Value of the amount of cash flow for the period after the fixed time period, where the applied cash flow can use an equity or Investment Capital model.
41. Fairness Opinion is a statement provided by the Business Valuer to state that a transaction to be carried out is fair or unfair.
42. Fairness Opinion on Loan Transactions and/or Guarantees is a statement provided by the Business Valuer to state that loan transactions and/or guarantees are fair or unfair.
43. Business Feasibility Study is a Professional Valuation Assignment given by the Business Valuer in the form of an opinion to state the feasibility of a business or project.
    Article 2
    (1) To carry out Business Valuation activities in the capital market, the Business Valuer must:
    a. comply with the code of ethics established by the valuer professional association; b. carry out Valuation in accordance with Indonesian Valuation Standards and guidelines for valuation and presentation of Valuation reports established by the Financial Services Authority;
    c. have qualifications, competence, and expertise in accordance with the industry specialization related to the Valuation object; and
    d. use Market Value.
    (2) In the event that Business Valuation cannot be carried out using the provisions as referred to in paragraph (1) letter b, the Business Valuer may use other valuation standards that are valid internationally as long as not otherwise stated by the Financial Services Authority.
    Article 3
    In the event that Valuation carried out by the Business Valuer refers to the results of property Valuation, the following provisions must be met:
    a. the results of property Valuation used as a reference are results of property Valuation issued by the Property Valuer; b. the results of property Valuation used as a reference are attached to the Business Valuation Report; and
    c. the Valuation Date in the Business Valuation is the same as the Valuation Date in the property Valuation.
    Article 4
    In the event that Valuation carried out by the Business Valuer refers to the results of Business Valuation, the following provisions must be met:
    a. the results of Business Valuation used as a reference are results of Business Valuation issued by the Business Valuer; b. the results of Business Valuation used as a reference are attached to the Business Valuation Report; and
    c. the Valuation Date in the Business Valuation used as a reference is the same as the Valuation Date in the Business Valuation.
    Article 5
    (1) In the event that Valuation carried out by the Business Valuer refers to financial statements, the following provisions must be met:
    a. the financial statements used as the basis for Valuation are financial statements that have been audited by a public accountant registered with the Financial Services Authority; b. the financial statements used as the basis for Valuation for companies located outside the jurisdiction of Indonesia are financial statements that have been audited by a public accountant registered in the country of origin of the company being valued;
    c. the time period between the date of the financial statements and the Business Valuation Report Date is not more than 6 (six) months; and
    d. the Valuation Date used by the Business Valuer is the same as the date of the financial statements.
    (2) In the event that the Business Valuer carries out a Fairness Opinion assignment, financial statements that have been reviewed by a public accountant registered with the Financial Services Authority may be used.
    Article 6
    (1) In the event that the Business Valuer revises the Business Valuation Report, the Business Valuer must:
    a. reissue the Business Valuation Report with a different date and number, accompanied by reasons and explanations for the issuance of the revision to the Business Valuation Report in question; and b. state in the Business Valuation Report of the revision that the report is a revision report and cancel the previous Business Valuation Report. (2) Material facts and changes must be disclosed in the revised Business Valuation Report.
    Article 7
    (1) The Business Valuation Report is valid for 6 (six) months from the Valuation Date.
    (2) If within the 6 (six) month period as referred to in paragraph (1) has not ended and there are matters that can affect the Value conclusion by more than 5% (five percent), the Business Valuation Report becomes invalid.
    CHAPTER II
    REPLACEMENT OF BUSINESS VALUER
    Article 8
    (1) Replacement of the Business Valuer can only be carried out if the Business Valuer:
    a. resigns; or b. is dismissed by the assignor with notification that the assignment has been stopped, accompanied by objective reasons.
    (2) Replacement of the Business Valuer as referred to in paragraph (1) must be evidenced by a written letter from the assignor.
    (3) Replacement of the Business Valuer is only carried out for Valuation on the Valuation object with the same purpose, objective, and Valuation Date.
    Article 9
    Before accepting a Professional Valuation Assignment, the replacement Business Valuer must first:
    a. request written approval from the prospective assignor to request information from the Business Valuer being replaced; b. communicate, both in writing and orally, with the Business Valuer being replaced regarding issues that, in the opinion of the replacement Business Valuer, will help in the acceptance or rejection of the Professional Valuation Assignment; and
    c. evaluate the provisions as referred to in letters a and b to decide whether to accept or reject the Professional Valuation Assignment.
    Article 10
    (1) The Business Valuer being replaced must provide immediate and complete answers to questions from the replacement Business Valuer based on the facts known to them. (2) The Business Valuer being replaced and the replacement Business Valuer must maintain the confidentiality of information obtained, except upon request by the Financial Services Authority or as required by legislation. (3) The replacement Business Valuer must repeat the implementation of Valuation in accordance with the standards and guidelines for Valuation as referred to in Article 2. (4) The replacement Business Valuer is not responsible for the work of the Business Valuer being replaced and does not issue a report reflecting the division of responsibility.
    CHAPTER III
    REVIEW OF VALUATION RESULTS
    Article 11
    (1) In the event of suspected violations in the implementation of Valuation, the Financial Services Authority may appoint another Business Valuer to conduct a review or re-valuation. (2) The review of the Business Valuation Report as referred to in paragraph (1) aims to provide an opinion that the analysis, Valuation Approach, Valuation Method, and Value conclusion in the reviewed Business Valuation Report are correct, reasonable, and supported by sufficient evidence. (3) The re-valuation as referred to in paragraph (1) aims to obtain a second opinion. (4) If necessary, the other Business Valuer appointed by the Financial Services Authority as referred to in paragraph (1) may request opinions from Experts. (5) The review or re-valuation of the Business Valuation Report as referred to in paragraph (1) is prohibited from being based on events after the Valuation Date of the Business Valuation Report being reviewed or re-valued.
    Article 12
    The review or re-valuation of the Business Valuation Report as referred to in Article 11 paragraph (1) must be carried out on at least the following:
    a. the accuracy of Valuation projections and calculations in the Valuation Method; b. the accuracy and reasonableness of all Assumptions used in accordance with relevant data and information;
    c. the adequacy and relevance of data and the reasonableness of the Valuation Approach and Valuation Method used;
    d. the truthfulness, reasonableness, and consistency of the analysis, opinion, and conclusion of the Business Valuation Report being reviewed; and e. the conformity of the Valuation results presented in the Business Valuation Report being reviewed with the standards and guidelines as regulated in this Financial Services Authority Regulation.
    Article 13
    (1) The report of the review or re-valuation results of the Business Valuation Report as referred to in Article 11 paragraph (1) must disclose at least:
    a. the identity of the Business Valuer who issued the Business Valuation Report being reviewed or re-valued and the purpose of the assignment; b. the identity of the assignor and users of the review or re-valuation results report;
    c. the results of identification of the Valuation object, Valuation Date, Business Valuation Report Date, and the opinion of the Business Valuer present in the Business Valuation Report being reviewed or re-valued;
    d. the date of implementation of the review or re-valuation; e. a description of the review or re-valuation process carried out; f. Assumptions and limiting conditions in the implementation of the review or re-valuation; g. opinion and conclusion; and h. all information used in the review or re-valuation process. (2) The report of the review or re-valuation results as referred to in paragraph (1) must disclose comprehensive reasons regarding the opinion and conclusion stated.
    Article 14
    A difference in Value conclusion between the review or re-valuation results report and the Business Valuation Report being reviewed or re-valued is considered material if there is a difference in Value conclusion of more than 15% (fifteen percent) from the Value conclusion of the Business Valuation Report being reviewed or re-valued.
    Article 15
    The results of the review or re-valuation must be submitted by the other Business Valuer appointed by the Financial Services Authority as referred to in Article 11 paragraph (2) to the Financial Services Authority no later than 7 (seven) days after the date of the review or re-valuation results report.
    Article 16
    Costs arising as a result of the review or re-valuation of the Business Valuation Report become the burden of the assignor as stated in the Business Valuation Report being reviewed or re-valued.
    CHAPTER IV
    OBLIGATIONS OF THE BUSINESS VALUER IN PROFESSIONAL VALUATION ASSIGNMENTS
    Article 17
    Before accepting a Professional Valuation Assignment, the Business Valuer must:
    a. obtain adequate information at least including the identity of the assignor;
44. the condition of the entity and its industry;
45. the Valuation object;
46. the Valuation Date;
47. the scope of the Professional Valuation Assignment, at least including:
    a) the purpose of the Professional Valuation Assignment; b) Assumptions and limiting conditions used in the Professional Valuation Assignment; and c) the Basis of Value and Value Premise used;
48. the Professional Valuation Assignment contract (work agreement);
49. the terms of the Professional Valuation Assignment requested by the assignor;
50. the nature of the object being valued including control characteristics and market liquidity level;
51. procedures that must be fulfilled in the Professional Valuation Assignment and restrictions on those procedures by the assignor;
52. other conditions outside the control of the Business Valuer or assignor, if there are other conditions outside the control of the Business Valuer or assignor; and
53. relevant legislation regarding the Valuation object or Professional Valuation Assignment;
    b. create a Professional Valuation Assignment contract (work agreement) with the assignor in written form, signed by the Business Valuer who signs the Business Valuation Report and the assignor, containing at least:
54. the Basis of Value to be used;
55. the nature and purpose of the Professional Valuation Assignment;
56. the rights and obligations of the assignor;
57. the rights and obligations of the Business Valuer;
58. initial Assumptions that can be used and limiting conditions;
59. the type and use of reports to be issued; and
60. the basis for calculating the Business Valuer's service fees.
    Article 18
    (1) After receiving the assignment, the Business Valuer must carry out:
    a. analysis regarding the nature, facts, Valuation object, and planned transaction conditions at the beginning of the professional valuation assignment; b. analysis of all aspects of the Valuation object; and
    c. inspection of the Valuation object.
    (2) The analysis as referred to in paragraph (1) letter a aims to:
    a. clarify data needs and discuss with the assignor to obtain mutual understanding regarding the Professional Valuation Assignment; b. identify, collect, and analyze data; and
    c. determine the application of the appropriate and suitable Valuation Approach and Valuation Method;
    (3) In the event that conditions require the revision of the Professional Valuation Assignment contract (work agreement) as referred to in Article 17 letter b, the revision must be carried out based on agreement between the Business Valuer and the assignor.
    Article 19
    The Business Valuer must consider the scope of the Professional Valuation Assignment which at least includes:
    a. the Valuation object that needs to be identified and inspected; b. the data that needs to be examined; and
    c. the analysis of data and information that needs to be carried out to obtain the opinion and Valuation results.
    Article 20
    (1) In the event that the Business Valuer uses the opinion, work results, or statements of an Expert, the Business Valuer must:
    a. disclose Assumptions and limiting conditions including the level of responsibility and Assumptions of the Business Valuer regarding the work results of the Expert; b. include the opinion, work results, or statements of the Expert in the Business Valuation Report; and

c. attach the work report of the Expert Personnel in the Business Valuation Report.
(2) The time period between the Expert Personnel's work report and the Valuation Date must not exceed 12 (twelve) months from the date of issuance of the Expert Personnel's report.

Article 21
Business Valuers must use data and information obtained from trustworthy sources and must disclose the source and the time of obtaining it in the Business Valuation Report.

CHAPTER V
PROHIBITIONS FOR BUSINESS VALUERS IN PROFESSIONAL VALUATION ASSIGNMENTS

Article 22
In carrying out Professional Valuation Assignments, Business Valuers are prohibited from:
a. issuing opinions or conclusions in the Business Valuation Report before the Valuation process is conducted; b. conducting a Valuation where the opinion or conclusion in the Business Valuation Report has been predetermined;
c. issuing 2 (two) or more Valuation results for the same Valuation Object and for the same Valuation Date;
d. accepting a Professional Valuation Assignment if the Business Valuer has information that another Business Valuer has been appointed by the same client to conduct a Valuation on the same Valuation Object with the same intent and purpose and Valuation Date, unless it is done as a replacement for the Business Valuer as regulated in this Financial Services Authority Regulation; e. producing a misleading Business Valuation Report and/or allowing other Parties to submit a misleading Business Valuation Report; f. accepting a Professional Valuation Assignment from both the buyer and seller regarding the same Valuation Object on the same Valuation Date; g. accepting a Professional Valuation Assignment where there are scope limitations and/or conditions that limit the scope of the assignment to such an extent that the Valuation result cannot be justified; h. providing Assumptions and limiting conditions that result in the use of the Business Valuation Report being limited;
i. using Assumptions and limiting conditions that cause the Valuation Basis or Value Premise to deviate from the Professional Valuation Assignment contract (work agreement);
j. using Assumptions that reduce the substance of the Value; k. using Assumptions and limiting conditions that reduce the Business Valuer's responsibility for the Valuation result;
l. accepting payment for Valuation services, whether in the form of commissions or otherwise, other than what has been agreed upon in the Professional Valuation Assignment contract (work agreement); and
m. providing confidential data and/or information used to conduct Business Valuation and/or for purposes other than Business Valuation activities to anyone, except:

1. having obtained approval from the Party owning the confidential data and/or information;
2. in the context of supervision conducted by the Financial Services Authority and/or other Parties in accordance with applicable laws and regulations; and/or
3. for judicial interests.

CHAPTER VI
BUSINESS VALUATION WORKING PAPERS

Article 23
In carrying out Professional Valuation Assignments, Business Valuers must create and maintain Business Valuation working papers.

Article 24
Business Valuation working papers must contain records organized by the Business Valuer regarding Valuation procedures, testing, all data and information used including comparable data, data and information sources, analysis of data and information, and conclusions made in connection with the Valuation process conducted.

Article 25
Business Valuation working papers must show that:
a. the Professional Valuation Assignment has been well planned and supervised; b. adequate understanding of the Valuation Object has been obtained by the Business Valuer; and
c. the data and information used, Valuation evidence obtained, Valuation procedures established, and testing conducted, have been adequate as a basis for expressing an opinion on the Valuation Object.

Article 26
(1) Business Valuation working papers must be documented in both unalterable printed and electronic forms.
(2) In the event that Business Valuation working papers cannot be documented in printed form as referred to in paragraph (1), the working papers may be documented in electronic form or vice versa.

Article 27
Business Valuation working papers must be stored for a period in accordance with the Law regarding company documents.

CHAPTER VII
VALUATION APPROACHES, VALUATION METHODS, AND VALUATION PROCEDURES

Article 28
(1) In using Valuation Approaches, Valuation Methods, and Valuation procedures, Business Valuers must:
a. use at least 2 (two) Valuation Approaches to obtain accurate and objective Valuation results; b. select and apply Valuation Approaches, Valuation Methods, and Valuation procedures that are appropriate with the definition of Value sought and the characteristics of the Valuation; and
c. pay attention to the requirements and disclosures established in this Financial Services Authority Regulation.
(2) In the event that the Valuation is conducted on:
a. non-operating holding companies; and/or b. companies that only have assets but do not operate, Business Valuers may use at least 1 (one) Valuation Approach. (3) In the event that the Valuation only uses 1 (one) Valuation Approach as referred to in paragraph (2), the Business Valuer must disclose the reason for using a single Valuation Approach in the Business Valuation Report.

CHAPTER VIII
ADJUSTMENTS IN VALUATION

Article 29
Business Valuers must make adjustments to items in the financial statements to generate an indication of Value.

Article 30
Business Valuers must exercise caution in making adjustments to historical financial statements and must be supported by sufficient data and information to guarantee the validity of the financial statement adjustments.

Article 31
(1) In making adjustments to financial statements, Business Valuers must conduct analysis to:
a. understand the relationship between the income statement and other comprehensive income with the balance sheet, including historical trends, and assess risks related to operational activities and future business performance prospects; b. compare risks and other parameters with similar businesses; and
c. estimate the economic capability and business prospects.
(2) In conducting the matters referred to in paragraph (1), the Business Valuer must analyze at least the following:
a. the magnitude of the time value of money; b. common size statement percentages of sales in the income statement and other comprehensive income and of total assets in the balance sheet; and
c. financial ratios.
(3) Analysis and/or adjustments to financial statements as referred to in paragraph (1) and paragraph (2) must be conducted for at least 5 (five) consecutive fiscal years, or in accordance with the age of the company if the company has been established for less than 5 (five) years.

Article 32
In making adjustments to financial statements, Business Valuers must pay attention to:
a. separation of items that are non-recurring in normal company operations (non-recurring), items in the financial statements that do not reflect non-recurring events, or items in the financial statements that do not reflect fair Value; b. separation of items outside normal company operations that must be excluded prior to conducting the Valuation calculation;
c. controlling adjustments in the event of a Valuation of controlling shares by separating items in the financial statements from transactions involving controlling interest; and
d. adjustments to other unreasonable items.

Article 33
(1) In the event that the Business Valuer uses a comparison of the company's financial statements with other companies' financial statements, each item in the financial statements must be evaluated and if there are differences in accounting policies, adjustments must be made to the accounting policies used by the company being valued to reduce such differences. (2) Business Valuers must pay attention to the impact of adjustments on related items.

Article 34
Business Valuers must disclose and explain in the Business Valuation Report regarding every adjustment made to the financial statements.

CHAPTER IX
ASSUMPTIONS AND LIMITING CONDITIONS

Article 35
Assumptions and limiting conditions used by the Business Valuer must meet the following provisions:
a. produce a Business Valuation Report with a non-disclaimer opinion; b. reflect that the Business Valuer has conducted a review of the documents used in the Valuation process;
c. reflect that the data and information obtained come from sources with trustworthy accuracy;
d. use adjusted financial projections that reflect the fairness of financial projections made by management with their ability to achieve them (fiduciary duty); e. reflect that the Business Valuer is responsible for the implementation of the Valuation and the fairness of the adjusted financial projections; f. produce a Business Valuation Report that is open to the public, except where there is confidential information that could affect company operations; g. reflect that the Business Valuer is responsible for the Business Valuation Report and Value conclusions; and h. reflect that the Business Valuer has obtained information regarding the legal status of the Valuation Object from the client.

CHAPTER X
RISK-FREE INTEREST RATES

Article 36
In the event that the Business Valuer uses risk-free interest rates, the following provisions must be met:
a. the risk-free interest rate used must be adjusted to the currency presented in the financial statements of the Valuation Object; and b. the data source and maturity date of the instrument used in determining the risk-free interest rate, as well as the magnitude of the risk-free interest rate, must be disclosed in the Business Valuation Report.

Part One
Transactions in Rupiah Currency

Article 37
(1) In the event that transactions are conducted in Rupiah currency, the determination of the risk-free interest rate must be based on government bonds with a maturity period corresponding to the Valuation Object. (2) In the event that transactions are conducted in Rupiah currency, for Valuation Objects that have an remaining useful economic life of at least 10 (ten) years or Valuation Objects in Going Concern condition, the determination of the risk-free interest rate must be based on government bonds that will have a maturity period of at least 10 (ten) years.

Part Two
Transactions in Currencies Other Than Rupiah

Article 38
(1) In the event that transactions are conducted in currencies other than Rupiah, the determination of the risk-free interest rate must be based on government bonds in the currency corresponding to the currency presented in the financial statements of the Valuation Object, with a maturity period corresponding to the Valuation Object. (2) In the event that transactions are conducted in currencies other than Rupiah, for Valuation Objects that have an remaining useful economic life of at least 10 (ten) years or Valuation Objects in Going Concern condition, the determination of the risk-free interest rate must be based on government bonds that will have a maturity period of at least 10 (ten) years.

Article 39
If there are no government bonds in the currency as referred to in Article 38, the Business Valuer must use the risk-free interest rate of that country and adjust it with the relevant country risk level.

CHAPTER XI
DISCOUNTS AND PREMIUMS

Article 40
In determining Value conclusions for Valuation Objects, Business Valuers must use Discount for Lack of Marketability and Premium for Control or Discount for Lack of Control.

Article 41
In using Discount for Lack of Marketability, Business Valuers must pay attention to:
a. in the event that the Valuation Object is not a public company then:

1. Discount for Lack of Marketability for majority shareholders is between 20% (twenty percent) and 40% (forty percent) of the indicated Value; and
2. Discount for Lack of Marketability for minority shareholders is between 30% (thirty percent) and 50% (fifty percent) of the indicated Value; and
   b. in the event that the Valuation Object is a public company then:
3. Discount for Lack of Marketability for majority shareholders is at most 20% (twenty percent) of the indicated Value; and
4. Discount for Lack of Marketability for minority shareholders is between 10% (ten percent) and 30% (thirty percent) of the indicated Value.

Article 42
In using Premium for Control or Discount for Lack of Control, Business Valuers must pay attention to:
a. the magnitude of losses suffered by minority shareholders of private companies compared to minority shareholders of companies listed on the stock exchange; b. actions that can be taken by controlling shareholders of the controlled company to make their shares more beneficial;
c. in the event that the Valuation Object is a public company, the Premium for Control or Discount for Lack of Control that can be used in the Valuation is between 20% (twenty percent) and 35% (thirty-five percent) of the indicated Value; and
d. in the event that the Valuation Object is a private company, the Premium for Control or Discount for Lack of Control that can be used in the Valuation is between 30% (thirty percent) and 70% (seventy percent) of the indicated Value.

Article 43
Business Valuers must explain the reasons for determining the percentage of discount or premium value as referred to in Article 41 and Article 42, which are used in the Valuation calculation in the Business Valuation Report.

Article 44
Discount for Lack of Control and Discount for Lack of Marketability are not applied when the Business Valuer conducts a Valuation of minority shareholdings for transactions intended to make the company no longer a public company.

CHAPTER XII
VALUE CONCLUSIONS

Article 45
(1) In making Value conclusions, Business Valuers must consider:
a. relevant Valuation Approaches, Valuation Methods, and Valuation procedures; b. available and relevant data and information; and
c. appropriate discounts or premiums.
(2) Value conclusions as referred to in paragraph (1) must be obtained by:
a. measuring the reliability of Valuation results obtained from the use of several different Valuation Approaches and Valuation Methods; b. connecting and reconciling Valuation results obtained from the use of several different Valuation Approaches and Valuation Methods; and
c. determining that the Value conclusion is the result of Valuation on more than one Valuation Approach and Valuation Method.

Article 46
Business Valuers must clearly disclose in the Business Valuation Report regarding the adjustment and reconciliation procedures conducted to obtain the Value conclusion, including:
a. reasons for applying the Valuation Approaches and Valuation Methods used; b. considerations in making financial statement adjustments; and
c. reconciliation of the indicated Values generated by each Valuation Approach and Valuation Method used.

Article 47
Value conclusions must be stated as a single amount in the currency corresponding to the currency used in the financial statements of the Valuation Object.

Article 48
In the event that the Professional Valuation Assignment is intended for the purpose of issuing an Opinion on Fairness, the Business Valuer may present Valuation results in a Value range by meeting the following provisions:
a. the Business Valuer must disclose sufficient explanation and reasons in the Business Valuation Report regarding the following:

1. uncertainty of financing plans in the transaction plan;
2. uncertainty of exchange rates;
3. uncertainty of market risks; or
4. other influencing factors; and
   b. the upper and lower limits of the value range must not exceed 7.5% (seven point five percent) of the Value used as the reference for that range, which is obtained based on the calculation as referred to in Article 45 paragraph (2).

CHAPTER XIII
IMPORTANT EVENTS AFTER THE VALUATION DATE

Article 49
(1) Important events after the Valuation Date, both known and reasonably knowable up to the Date of the Business Valuation Report, must be disclosed in the Business Valuation Report. (2) Important events after the Valuation Date are prohibited from being used to update the Valuation result. (3) In the event that important events after the Valuation Date contain information that could affect the Value of the Valuation Object, the Business Valuer must disclose the nature and impact in the Business Valuation Report. (4) Disclosure of important events as referred to in paragraph (1) and paragraph (3) must clearly indicate that such disclosure is not intended to influence the determination of Value as of the Valuation Date.

CHAPTER XIV
VALUATION OF HOLDING COMPANIES

Article 50
In Valuations of Holding Companies, Business Valuers must conduct Valuations on all participations or ownerships in other entities.

Article 51
In the event that Valuation is conducted on participations or ownerships below 20% (twenty percent) and do not have the ability to determine or control, directly or indirectly, in any way, the management and/or policies of such company, the following provisions apply:
a. Business Valuers may use at least one Valuation Approach, namely the Market Approach, except where conditions prevent the Business Valuer from using the Market Approach; and b. Business Valuers may use audited or unaudited financial statements, with the following provisions:

1. the time period between the date of the financial statements and the Date of the Business Valuation Report is not more than 6 (six) months; and
2. the date of the financial statements used must be the same as the Valuation Date; and
3. in the event that unaudited financial statements are used, audited financial statements of the Valuation Object must be available with a financial statement date not more than 12 (twelve) months from the Valuation Date.

CHAPTER XV
GUIDELINES FOR VALUATION USING THE ASSET APPROACH

Article 52
(1) Business Valuers using the Asset Approach in Professional Valuation Assignments must have expertise in Property Valuation and Business Valuation.
(2) In the event that the Business Valuer as referred to in paragraph (1) does not have expertise in Property Valuation, the Business Valuer must refer to the results of Property Valuation.

Article 53
(1) The Asset Approach can be used to obtain an indication of Value of a company's Value, Invested Capital Value, capital structure Value, and/or Net Asset Value of the company (equity). (2) Equity value indications or asset value estimates are obtained from the difference between asset values including intangible assets and liability values, based on Appraised Value.

Article 54
In the event that Valuation is conducted on a portion of an asset (partial interest), the holder of the ownership rights over that asset must be able to decide to sell or be able to cause the sale (majority interest).

Article 55
In the event that Valuation is conducted on majority ownership of the Valuation Object, the Business Valuer must disclose estimates of Value based on majority and minority ownership of the Valuation Object in the Business Valuation Report.

Article 56
In the event that the Business Valuer uses financial projections in conducting Valuation using the Asset Approach, the financial projections must be obtained from Management Parties and disclosed in the Business Valuation Report.

Article 57
(1) Items in the financial statements must be adjusted to reflect Market Value on the Valuation Date.
(2) Adjustments as referred to in paragraph (1) must be disclosed in the Business Valuation Report.

Article 58
(1) Methods used in the Asset Approach are as follows:
a. adjusted net asset method, adjusted book value method, net asset valuation method, and assets accumulation method; and/or b. excess earning method. (2) In the event that the Business Valuer uses the excess earning method, intangible assets must be valued collectively (big pot theory of goodwill).

Article 59
In the event that the Business Valuer uses the adjusted net asset method as regulated in Article 58 paragraph (1), the following provisions apply:
a. the adjusted net asset method must be used to value:

1. equity of a company where the Company Value is highly dependent on fixed asset values (a heavy based on fixed assets company);

2. equity of a Holding Company;

3. companies that do not have an income history with positive prospects, companies with fluctuating income, or companies whose ability to continue Going Concern is doubtful, such as newly established companies or companies in difficulty obtaining income (troubled companies);

4. companies that own and/or control significant amounts of tangible assets;

5. companies whose workforce provides relatively small added value to the goods and services produced by the company; or

6. companies that have intangible assets in insignificant amounts;
   b. adjustments to current assets must be made according to the nature of the current assets;
   c. Valuation of fixed tangible assets must be conducted according to the methods applicable in Property Valuation according to the Value Premises established;
   d. Valuation of intangible assets must be conducted by meeting the following provisions:

7. The Business Valuer must identify and value intangible assets of the Valuation Object individually;

8. The Business Valuer must determine intangible assets that meet the requirements for Valuation;

9. the components of intangible assets valued must have the following criteria:
   a) can be identified and described in detail; b) can provide measurable economic benefits to the owner of the Valuation Object; c) have the potential to generate other assets and/or be able to create added value to other assets; d) are subjects of private ownership rights that are legally transferable; e) can be recognized and protected; and f) have an economic useful life period;

10. Valuation of intangible assets must be conducted by:
    a) using methods that consider the economic benefits generated by the intangible assets; b) basing on the market price of the intangible assets; or c) basing on the costs that must be incurred to recreate (cost of recreation) at present while considering the remaining useful life of the intangible assets; and

11. The Business Valuer must disclose the identification of intangible assets valued and the Valuation Method used in valuing those assets in the Business Valuation Report;
    e. debts or liabilities are valued according to the values stated in the financial position reports, unless there are other factors affecting them; and f. debt instruments are valued based on Market Value.

Article 60
In the event that the Business Valuer uses the excess income capitalization method as referred to in Article 58 paragraph (1) letter b, the following provisions apply:
a. the excess income capitalization method must be used to value the equity of an operating company with relatively stable revenue and profit growth; b. the revenue of a company used is the result of the productivity of tangible and intangible assets;
c. every excess return (excess return or earning) obtained above the normal return (normal return) on tangible assets as referred to in letter b is calculated as the return from intangible assets collectively;
d. the income statement and other comprehensive income report used are:

1. the annual income statement and other comprehensive income report of the last year;
2. the income statement and other comprehensive income report of the last 12 (twelve) months;
3. the weighted average of the last 5 (five) years at minimum; or
4. the projection of the following year that is believed to be maintainable in the future;
   e. the income statement and other comprehensive income report as referred to in letter c must be adjusted according to the principles and procedures of adjustment to obtain normal operating profit from the Valuation Object; f. Revaluation of tangible assets and company liabilities must be conducted according to the provisions applicable to the net asset adjustment method; g. Valuation used in the excess income capitalization method must be based on:
5. net tangible asset value;
6. Normal Rate of Return (in percentage) for net tangible asset value;
7. the amount of normal return for net tangible asset value; or
8. adjusted financial statements;
   h. the determination of Normal Rate of Return for net tangible asset value must be in accordance with the risks inherent in the net tangible asset value and reflect the weighted average rate of return between equity cost and debt cost according to the borrowing capacity of the net tangible asset value in obtaining loans;
   i. economic revenue or normal profit to be deducted from the amount of normal return on net tangible asset value reflects the economic revenue estimated to be maintainable in the future;
   j. the difference between normal economic revenue and the amount of return on net tangible asset value is the amount of return on intangible assets; k. the conversion of excess income into the value of intangible assets as a whole (going concern value) is conducted using the Capitalization Rate according to the risks inherent in the intangible assets while considering:
9. the nature of the business;
10. company management;
11. the company's market share;
12. the company's reputation;
13. the consistency of the economic revenue generated; and
14. the consistency of the company's customer base;
    l. the equity value obtained by adding the value of intangible assets (going concern value) to the net tangible asset value reflects the overall equity (common stocks) value; and
    m. the determination of the Rate of Return for net tangible asset value and the Capitalization Rate for intangible assets must be disclosed in the Business Valuation Report.

CHAPTER XVI
VALUATION GUIDELINES WITH MARKET APPROACH

Article 61
The methods used in the Market Approach are as follows:
a. guideline publicly traded company method; b. guideline merged and acquired company method; and/or
c. prior transactions method.

Article 62
In the event that the Business Valuer uses the guideline publicly traded company method as referred to in Article 61 letter a, the following provisions apply:
a. companies that can be used as comparable companies are companies that have had market prices occur within a period not exceeding 6 (six) months before the Valuation Date; b. the Business Valuer must have sufficient confidence to prove and explain that the market price data used in the Market Approach is generated from a transaction that is arm's length;
c. Valuation can only produce an indication of Minority Value;
d. comparable companies used must meet the following criteria:

1. industry, business activities, products, and business risks are similar;
2. growth characteristics (growth in sales and earnings) and capital structure are comparable;
3. historical financial performance over the last 5 (five) years is comparable;
4. company size (total assets) is comparable; and
5. market share is comparable;
   e. in the event that all criteria as referred to in letter d are met, the number of comparable companies used is at least 5 (five) companies; f. in the event that the criteria as referred to in letter d are met by at most 3 (three) or 4 (four) criteria, the number of comparable companies used is at least 8 (eight) companies; and g. the Business Valuer must make adjustments to the financial statements of the comparable companies which at minimum include:
6. adjustment of non-recurring, extraordinary, and window dressing items and their impact on taxation;
7. adjustment of the comparable company's accounting policies with the Valuation Object; and
8. adjustment of non-operating items and unusual transactions with related parties.

Article 63
In the event that the Business Valuer uses the guideline merged and acquired company method as referred to in Article 61 letter b, the following provisions apply:
a. Valuation can only produce an indication of Majority Value; b. comparable companies used must meet the following criteria:

1. in the event that the comparable company used is a company whose shares are listed on the stock exchange then:
   a) the company used as a comparable must have previously conducted merger or acquisition transactions within a period not exceeding 5 (five) years before the Valuation Date; b) the company used as a comparable must be listed on the same stock exchange as the company that is the Valuation Object; c) the company used as a comparable must have the same line of business; d) the company used as a comparable must have market capitalization and/or capital structure equivalent to the company that is the Valuation Object; and e) the merger or acquisition transactions previously conducted are arm's length transactions and not transactions between related parties or under common control transactions;
2. in the event that the comparable company used is a private company then:
   a) the company used as a comparable must have previously conducted merger or acquisition transactions within a period not exceeding 3 (three) years before the Valuation Date; and b) the Value obtained is from an arm's length transaction and not a transaction between related parties or under common control transactions;
   c. the number of comparable companies used is at least 5 (five) companies; and
   d. in the event that the number of companies used is only 3 (three) or 4 (four) companies, the guideline merged and acquired company method cannot be used as the primary Valuation Method or obtain a material weight in producing a Value conclusion.

Article 64
In the event that the Business Valuer cannot use the guideline publicly traded company method and the guideline merged and acquired company method, then the Business Valuer can use the prior transactions method with the requirement that the transactions used as comparables must be arm's length.

Article 65
(1) In the event that the Business Valuer uses Valuation ratios in conducting comparisons to convert relevant financial variables of the Valuation Object, then the Business Valuer must meet the following provisions:
a. the Valuation ratios used must be applied to the Valuation Object consistently against comparable or relevant variables of the Valuation Object; b. the reasons for selection and the method of application of the Valuation ratios used must be explained in the Business Valuation Report;
c. in the event that the Business Valuer uses the equity multiple ratio, the following ratios can be used:

1. price to earnings ratio (P/E ratio);
2. price to sales (P/S ratio); and/or
3. price to book value ratio (P/BV ratio);
   d. in the event that the Business Valuer uses the market value of invested capital ratio, then to obtain an indication of the equity value of the Valuation Object, the Market Value of invested capital must first be reduced by more senior capital; e. in the event that the Business Valuer uses investment ratios, the Business Valuer can use the following ratios:
4. market value of invested capital to gross cash flow before depreciation and taxes (MVIC/GCF);
5. market value of invested capital to sales (MVIC/sales);
6. market value of invested capital to earning before interest, taxes, depreciation and amortization (MVIC/EBITDA);
7. market value of invested capital to earning before interest and taxes (MVIC/EBIT); and/or
8. market value of invested capital to book value invested capital (MVIC/BVIC);
   f. the comparison period for the Valuation ratios in the financial statements of the Valuation Object and the comparable company must be the same; g. the financial statements of the comparable company must be audited financial statements; and h. Valuation ratios must be supported by accurate data and calculated based on an analysis of the comparison of fundamental variables of the company that is the Valuation Object with the comparable company. (2) The Business Valuer can apply the price to earnings ratio as referred to in paragraph (1) letter c number 1 if depreciation value is not a significant cost element. (3) The Business Valuer can apply the price to book value ratio as referred to in paragraph (1) letter c number 3 if the Book Value of the comparable company's assets has been adjusted to Market Value. (4) The Business Valuer can apply the market value of invested capital to gross cash flow before depreciation and taxes (MVIC/GCF) ratio as referred to in paragraph (1) letter e number 1 if depreciation value is significant and the company has more than one depreciation policy. (5) The Business Valuer can apply the market value of invested capital to sales (MVIC/sales) ratio as referred to in paragraph (1) letter e number 2 if the Valuation Object and the comparable company have the same business characteristics. (6) In the event that audited financial statements of the comparable company with the same period as referred to in paragraph (1) letter f and letter g are not available to the public, the Business Valuer can use financial statements of the period closest to the Valuation Date that are available to the public.

CHAPTER XVII
VALUATION GUIDELINES WITH INCOME APPROACH

Article 66
The Income Approach can be used to estimate Value by anticipating and quantifying the ability of the Valuation Object to generate returns that will be received in the future.

Article 67
In the event that Valuation of a controlling shareholder interest is conducted using the Income Approach then:
a. the Value of non-operational assets and liabilities in the financial statements must be excluded from the calculation of operational asset Value; and b. the surplus of operational assets must be added to the operational entity Value or the deficit of operational assets must be deducted from the operational entity Value.

Article 68
(1) The methods used in the Income Approach are as follows:
a. discounted cash flow method; and b. Income Capitalization Method.
(2) The methods as referred to in paragraph (1) are prohibited from being used if the management of the Valuation Object has not prepared a business plan to be used as the basis for Valuation. (3) In the event that the management of the Valuation Object has not prepared a business plan as referred to in paragraph (2), then the Business Valuer can prepare the aforementioned business plan which must first be approved by the client, and the Business Valuer must be responsible for the business plan prepared. (4) The Business Valuer must have sufficient confidence that the Assumptions used in the preparation of the business plan as referred to in paragraph (2) and paragraph (3) are reasonable and accountable. (5) The confidence as referred to in paragraph (4) must be disclosed in the Business Valuation Report.

Article 69
The benefits or economic revenue that must be used in the Income Approach are in the form of Net Cash Flow for the company.

Article 70
(1) The cost of capital used in the Income Approach must consider the following:
a. short-term and long-term debt costs must use interest rate data issued by government banks; and b. preferred stock equity cost must use dividends that reflect the market dividend rate. (2) In the event that dividends do not reflect the market dividend rate as referred to in paragraph (1) letter a, then the dividend value is sought from comparable public companies.

Article 71
(1) Equity cost for shares must be calculated through:
a. capital asset pricing model; and/or b. discounted cash flow model.
(2) The Business Valuer must disclose the calculation results of each method as referred to in paragraph (1) in the Business Valuation Report.

Article 72
In the event that equity cost for shares is calculated using the capital asset pricing model, then the Business Valuer must consider the following:
a. the Risk-Free Rate of Return must use the risk-free interest rate as regulated in this Financial Services Authority Regulation; b. the beta coefficient used in calculating the capital asset pricing model must come from industry average data in the same sector as the Valuation Object or the average of several comparable companies;
c. equity risk premium must be based on published data; and
d. specific risks inherent in the Valuation Object.

Article 73
In the event that equity cost for shares is calculated using the discounted cash flow model, then the Business Valuer must use comparable companies that have Market Value equity.

Article 74
In the event that the Business Valuer uses the discounted cash flow method, then the Business Valuer must conduct review or adjustment of Assumptions, calculation accuracy, and accounting policies used in preparing financial statement projections.

Article 75
The discounted cash flow method can only be used to value:
a. companies that have conducted operational activities for one year or more; or b. companies that have conducted operational activities for less than one year but are companies formed to execute sales contracts or service provision with third parties.

Article 76
Net Cash Flow projections can be established in 2 (two) projection periods, namely:
a. fixed or specific time period referring to:

1. technical life of main production factors; and
2. business planning period that is not yet stable;
   b. perpetual time period starting from one year after the fixed time period until onwards.

Article 77
Application of the discounted cash flow method as referred to in Article 68 paragraph (1) letter a can use the equity model or the Invested Capital model.

Article 78
In the event that the Business Valuer uses the equity model, then the Valuer must follow the following provisions:
a. the discounted cash flows are cash flows available to common shareholders (equity); and b. the Discount Rate is the Rate of Return or cost of equity.

Article 79
In the event that the Business Valuer uses the Invested Capital model, then the Valuer must follow the following provisions:
a. the discounted cash flows are cash flows available to all capital providers; b. the Discount Rate reflects the weighted average cost of capital used to generate cash flows; and
c. equity value is estimated by reducing the company value or invested capital value with the Market Value of senior capital (preferred shares in the event the company issues preferred shares and interest-bearing debt).

Article 80
In the event that mid-year financial statements are used as the basis for Valuation, then the Business Valuer must disclose in the Business Valuation Report the reasons or basis for using the adjusted mid-year projections.

Article 81
In the event that the Business Valuer uses financial projections in conducting Valuation using the Income Approach, then financial projections must be obtained from management and disclosed in the Business Valuation Report.

CHAPTER XVIII
DISCOUNT RATE

Article 82
The Business Valuer in establishing the Discount Rate must:
a. calculate equity cost by considering:

1. the rate of return on funds placed in a risky investment;
2. preferred stock equity cost which is the preferred stock dividends paid; and
3. estimated inflation;
   b. consider returns from comparable investments;
   c. consider debt costs classified as capital structure;
   d. consider industry risks and company conditions; e. conduct at least the following procedures:
4. identify the sources of financing used; and
5. establish debt classified as capital structure that meets at minimum the following provisions:
   a) interest-free debt from shareholders; and b) interest-bearing short-term debt that falls into the permanent working capital category; f. calculate the percentage of capital structure or company leverage, with the provision that in the event Valuation is conducted on a Valuation Object that is a minority and majority ownership, the Business Valuer must use capital structure based on the Market Value of comparable companies in the same industry; g. use market interest rate data from the average of banks carrying out financing functions to determine debt costs, both short-term debt (working capital debt) and long-term debt (investment debt); h. make adjustments in the event there is debt financing with interest rates different from market interest rates to reflect comparable risks on the Valuation Object; and
   i. calculate the weighted average cost of capital proportionally based on the weight of each type of capital structure and the cost of each type of capital structure.

Article 83
The Business Valuer must disclose in the Business Valuation Report the reasons, Assumptions, and calculation process of the Discount Rate.

CHAPTER XIX
ECONOMIC REVENUE PROJECTIONS

Article 84
(1) The Business Valuer must use economic revenue projections in the Income Approach.
(2) Economic revenue projections are used to estimate the economic revenue flow of the Valuation Object using a Discount Rate that must be adjusted to the economic revenue rate of the Valuation Object.

Article 85
The Discount Rate and Capitalization Rate established by the Business Valuer must be elaborated and used in the analysis of economic revenue projections and disclosed in the Business Valuation Report.

Article 86
(1) In making economic revenue projections, the Business Valuer must:
a. analyze the financial statements of the Valuation Object and comparable companies in the same industry for a period of at least 3 (three) years in the last years; b. make adjustments to the financial statements of the Valuation Object, including the financial position report, income statement and other comprehensive income report, and cash flow report;
c. consider conditions occurring after the Valuation Date that can affect economic revenue projections;
d. consider the business growth projections of the Valuation Object according to the economic revenue rate generated by the Valuation Object and the business interests of the Valuation Object; e. make adjustments to the projected financial statements including the financial position report, income statement and other comprehensive income report, and cash flow report; f. consider the useful life or business cycle of the Valuation Object; and

g. in the event that the economic income of the Valuation Object or the operations of the Valuation Object depend on main production factors with a limited useful life or have a specific cycle, financial projections must be prepared for the duration of the useful life or reflect the cyclical nature of the business. (2) Adjustments as referred to in paragraph (1) letter b are used as working papers for the Business Valuer. (3) In making adjustments to financial statements as referred to in paragraph (1) letter b, the Business Valuer must do the following:
a. analyze and restate the financial data of the Valuation Object consistently and use the same currency as that used in the financial statements; b. adjust the values presented in the financial statements to fair values;
c. adjust income and expenses to reasonable levels and reflect sustainable results; and
d. group and adjust all non-operating assets, liabilities, income, and expenses.
(4) After financial statements are adjusted, the Business Valuer must present economic income projections in the Business Valuation Report, which include dividends based on estimated dividend pay-out ratios, cash flows, and earnings before interest, tax, depreciation, and amortization.

Article 87
The period for projecting economic income must be for a minimum of 5 (five) years into the future, or adjusted to the remaining useful life of the main production facilities of the Valuation Object.

Article 88
Business Valuers are prohibited from basing economic income projections solely on the use of historical data trends.

CHAPTER XX
TERMINAL VALUE

Article 89
To perform a Business Valuation with the Going Concern premise where there are projections for a fixed time period and a perpetual time period, the Business Valuer needs to calculate the Terminal Value.

Article 90
In the event that the Business Valuer calculates the Terminal Value, the Valuer must follow the following provisions:
a. Terminal Value estimation is done by applying the discounted cash flow method with 2 (two) periods of financial statement projections, namely the fixed time period and the perpetual time period; and b. the methods used to estimate the Terminal Value are:

1. Residual value; and
2. Income Capitalization.

Article 91
(1) Residual value as referred to in Article 90 letter b number 1 is used in the event that the Valuation Object has a specific duration.
(2) The Income Capitalization method as referred to in Article 90 letter b number 2 is used in the event that the entity that is the Valuation Object has a perpetual or undeterminable duration.

Article 92
(1) Further provisions regarding Terminal Value are established by the Financial Services Authority.
(2) The calculation of Terminal Value must follow the provisions established by the Financial Services Authority as referred to in paragraph (1).

CHAPTER XXI
FAIRNESS OPINION
First Section
Provision of Fairness Opinion

Article 93
(1) Fairness Opinion is given after the Business Valuer conducts an analysis of:
a. The value of the transacted object; b. the financial impact of the transaction to be conducted on shareholders' interests; and
c. business considerations used by company management regarding the planned transaction's impact on shareholders' interests.
(2) Fairness Opinion must be given for the entire transaction plan and the analysis elements of the transaction plan.

Article 94
In conducting the analysis as referred to in Article 93, the Business Valuer must do at least the following:
a. transaction analysis; b. qualitative and quantitative analysis of the transaction plan;
c. analysis of the fairness of the transaction value; and
d. analysis of other relevant factors.

Second Section
Fairness Opinion on Loan and/or Guarantee Transactions

Article 95
(1) Fairness Opinion on Loan Transactions and/or Guarantees must be based on the results of the evaluation of the transaction object.
(2) Fairness Opinion on Loan Transactions and/or Guarantees must be given for the entire loan and/or guarantee transaction plan and the analysis elements of the transaction plan.

Third Section
Implementation of Analysis and Scope of Information

Article 96
(1) Further provisions regarding the analysis of the provision of Fairness Opinion are established by the Financial Services Authority.
(2) The implementation of analysis and scope of information in conducting analysis as referred to in Article 94 and Article 95 must follow the provisions established by the Financial Services Authority as referred to in paragraph (1).

CHAPTER XXII
BUSINESS FEASIBILITY STUDY

Article 97
(1) The opinion given by the Business Valuer in conducting a Professional Valuation Assignment in the form of a Business Feasibility Study is to state the feasibility of a business or project. (2) In the event that the Business Valuer does not have expertise in the property field, a Business Feasibility Study requiring Property Valuation must refer to the opinion of a Property Valuer. (3) The opinion as referred to in paragraph (1) is given after the Business Valuer conducts an analysis of:
a. market feasibility; b. technical feasibility;
c. business model feasibility;
d. management model feasibility; and e. financial feasibility.

Article 98
(1) Further provisions regarding the analysis of the provision of feasibility opinion for a business or project are established by the Financial Services Authority. (2) The implementation of analysis and scope of information in conducting analysis as referred to in Article 96 must follow the provisions established by the Financial Services Authority as referred to in paragraph (1).

CHAPTER XXIII
BUSINESS VALUATION REPORT

Article 99
(1) A Business Valuer conducting a Professional Valuation Assignment must create a Business Valuation Report.
(2) The Business Valuation Report as referred to in paragraph (1) consists of:
a. a report presenting the Value conclusion of the Valuation Object; b. a Fairness Opinion report presenting the conclusion on the fairness of a transaction;
c. a Fairness Opinion report presenting the conclusion on the fairness of a loan transaction and/or guarantee;
d. a Business Feasibility Study report presenting the conclusion on the feasibility of a business or project; or e. other Business Valuation Reports.
(3) The Business Valuation Report as referred to in paragraph (2) must be in the form of a complete report (narrative report or long form report) and a short report (short form report). (4) The Business Valuer must use definitions and terms as referred to in Article 1. (5) In the event that the Business Valuer uses definitions and terms other than those established in this Financial Services Authority Regulation, such other definitions and terms must be clearly disclosed in the Business Valuation Report. (6) The short form report may be presented separately but is an integral part of the Business Valuation Report.

Article 100
(1) The Business Valuation Report as referred to in Article 99 paragraph (2) must be prepared in accordance with provisions regarding the form and content of the Business Valuation Report. (2) Further provisions regarding the form and content of the Business Valuation Report are established by the Financial Services Authority. (3) The form and content of the Business Valuation Report as referred to in Article 99 must follow the provisions established by the Financial Services Authority as referred to in paragraph (2).

CHAPTER XXIV
OTHER PROVISIONS

Article 101
(1) Provisions regarding the provision of Fairness Opinion for specific transactions are established by the Financial Services Authority.
(2) The implementation of analysis and scope of information in conducting analysis in the provision of Fairness Opinion for specific transactions must follow the provisions established by the Financial Services Authority as referred to in paragraph (1).

CHAPTER XXV
ADMINISTRATIVE SANCTIONS

Article 102
(1) Any Party that violates the provisions as referred to in Article 2 paragraph (1), Article 3, Article 4, Article 5, Article 6, Article 8, Article 9, Article 10, Article 12, Article 13, Article 15, Article 17, Article 18, Article 19, Article 20 paragraph (1), Article 21, Article 22, Article 23, Article 24, Article 25, Article 26, Article 27, Article 28 paragraph (1) and paragraph (3), Article 29, Article 30, Article 31, Article 32, Article 33, Article 34, Article 35, Article 36, Article 37, Article 38, Article 39, Article 40, Article 41, Article 42, Article 43, Article 45, Article 46, Article 47, Article 48, Article 49, Article 50, Article 51, Article 52, Article 55, Article 56, Article 57, Article 58 paragraph (2), Article 59, Article 60, Article 62, Article 63, Article 64, Article 65 paragraph (1), Article 67, Article 68 paragraph (2), paragraph (3) and paragraph (4), Article 69, Article 70, Article 71, Article 72, Article 73, Article 74, Article 75, Article 78, Article 79, Article 80, Article 81, Article 82, Article 83, Article 84, Article 85, Article 86, Article 87, Article 88, Article 90, Article 92 paragraph (2), Article 93 paragraph (2), Article 94, Article 95, Article 96 paragraph (2), Article 97 paragraph (2), Article 98 paragraph (2), Article 99, and Article 100 paragraph (1) and 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. fine, which is the 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) The procedure for imposing sanctions as referred to in paragraph (3) is carried out in accordance with applicable legislation.
(6) Administrative sanctions as referred to in paragraph (4) letter b, letter c, letter d, letter e, letter f, or letter 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. (7) Administrative sanctions in the form of a fine as referred to in paragraph (4) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (4) letter c, letter d, letter e, letter f, or letter g.

Article 103
In addition to administrative sanctions as referred to in Article 102 paragraph (4), the Financial Services Authority may take specific actions against any Party that violates the provisions of this Financial Services Authority Regulation.

Article 104
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 102 paragraph (4) and specific actions as referred to in Article 103 to the public.

CHAPTER XXVI
TRANSITIONAL PROVISIONS

Article 105
At the time this Financial Services Authority Regulation comes into force, Business Valuation Assignments and the presentation of Business Valuation Reports that have begun and are still in the process of completion shall continue to refer to the provisions as regulated in the Decision of the Head of the Capital Market Supervisory Board Number Kep-196/BL/2012 dated April 19, 2012 concerning Guidelines for Valuation and Presentation of Business Valuation Reports in the Capital Market along with Regulation Number VIII.C.3 which is its appendix.

CHAPTER XXVII
CLOSING PROVISIONS

Article 106
At the time this Financial Services Authority Regulation comes into force, the Decision of the Head of the Capital Market Supervisory Board Number Kep-196/BL/2012 concerning Guidelines for Valuation and Presentation of Business Valuation Reports in the Capital Market along with Regulation Number VIII.C.3 which is its appendix, is repealed and declared invalid.

Article 107
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, order the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta on May 25, 2020
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on July 2, 2020
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 161

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 35 /POJK.04/2020
CONCERNING
BUSINESS VALUATION AND PRESENTATION OF BUSINESS VALUATION REPORTS IN THE CAPITAL MARKET

I. GENERAL
A Valuer is an individual who, with their expertise, conducts Valuation activities in the capital market. The scope of Valuation activities conducted by valuers includes Property Valuation and Business Valuation. A Business Valuer is a valuer who conducts Business Valuation activities.

Valuers who are registered in the Capital Market must comply with the Indonesian Valuation Standards (SPI) prepared by the professional association of valuers and other standards that apply internationally if not yet regulated in the SPI, provided they do not conflict with applicable Financial Services Authority Regulations. Besides the SPI, valuers are also required to comply with Financial Services Authority Regulations as guidelines for Valuation in the Capital Market. For guidelines for Valuation referenced by Business Valuers, it is Bapepam-LK Regulation Number VIII.C.3 concerning Guidelines for Valuation and Presentation of Business Valuation Reports in the Capital Market.

In recent years, there have been changes and adjustments to the applicable guideline and standard provisions in the financial profession, including the valuer profession. In addition, in current practice, there are inconsistencies in the implementation or use of Bapepam-LK Regulation Number VIII.C.3, both for valuers and the Financial Services Authority as the supervisor.

In light of the above, it is necessary to replace the previous legislation regulating guidelines for Valuation and presentation of Business Valuation Reports in the capital market, issued prior to the formation of the Financial Services Authority, with a Financial Services Authority Regulation, with the aim of harmonization among legislation regarding valuers as well as the supervision needs and internal review processes of the Financial Services Authority.

II. ARTICLE BY ARTICLE

Article 1
Sufficiently clear.

Article 2
Paragraph (1)
Sufficiently clear.
Paragraph (2)
To respond to current and future developments, which does not rule out the emergence of business models whose Valuation is not yet covered in the existing scope, Business Valuers may use other valuation standards commonly used internationally, so that they can reflect the true Value of the Valuation Object, provided they are not yet regulated in the Indonesian Valuation Standards and Financial Services Authority Regulations, and are not otherwise stated by the Financial Services Authority. The Financial Services Authority does not determine otherwise for standards that apply internationally, among others because such standards are already regulated in the International Valuation Standard.

Article 3
Sufficiently clear.

Article 4
Sufficiently clear.

Article 5
Sufficiently clear.

Article 6
Paragraph (1)
The revised Business Valuation Report is supported by revision working papers.
Paragraph (2)
Sufficiently clear.

Article 7
Sufficiently clear.

Article 8
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
Reasons for the Business Valuer being dismissed by the assignor include, among others, the Business Valuer's death, the Business Valuer's registration certificate being suspended by the Financial Services Authority, illness, and others. Paragraph (2) Sufficiently clear. Paragraph (3) Sufficiently clear.

Article 9
Sufficiently clear.

Article 10
Sufficiently clear.

Article 11
Sufficiently clear.

Article 12
Sufficiently clear.

Article 13
Sufficiently clear.

Article 14
Sufficiently clear.

Article 15
Sufficiently clear.

Article 16
Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Paragraph (1)
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
One form of activity in the inspection of the Valuation Object is conducting discussions with management and site visits.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.

Article 19
Sufficiently clear.

Article 20
Sufficiently clear.

Article 21
Sufficiently clear.

Article 22
Sufficiently clear.

Article 23
Sufficiently clear.

Article 24
Forms of Business Valuation working papers include, among others, Valuation programs, analyses, memoranda, confirmation letters, representation letters, summaries of assignor documents, benchmarking data documents, inspection results, and lists or comments made or obtained by the Business Valuer in the context of the Professional Valuation Assignment.

Article 25
Sufficiently clear.

Article 26
Sufficiently clear.

Article 27
Sufficiently clear.

Article 28
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Valuation using only 1 (one) approach does not apply to the Valuation of subsidiary entities from the holding company whose data will be used in the Valuation of a non-operating holding company if the subsidiary entity does not meet the criteria in letter a and letter b. Paragraph (3) Sufficiently clear.

Article 29
Sufficiently clear.

Article 30
Sufficiently clear.

Article 31
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Letter a
The term "money value" refers to the impact of:
a. exchange rate differences; and/or b. inflation Letter b Sufficiently clear.
Letter c
Sufficiently clear.
Paragraph (3)
Sufficiently clear.

Article 32
Letter a
Sufficiently clear.
Letter b
Sufficiently clear.
Letter c
Transactions that involve controlling interests include, among others, transactions with related parties who have control, which can take the form of excessive management compensation, abnormal capital structure, excessive costs and expenses, and excessively high director salaries. Letter d Sufficiently clear.

Article 33
Sufficiently clear.

Article 34
Sufficiently clear.

Article 35
Sufficiently clear.

Article 36
Sufficiently clear.

Article 37
Sufficiently clear.

Article 38
Paragraph (1)
For example, if the Valuation Object has a remaining economic useful life of 6 (six) years, the determination of the risk-free interest rate used is based on government bonds maturing in 6 (six) years. Paragraph (2) For example, if the Valuation Object has a remaining economic useful life of 15 (fifteen) years, the determination of the risk-free interest rate used is based on government bonds maturing for at least 10 (ten) years or more.

Article 39
Sufficiently clear.

Article 40
Sufficiently clear.

Article 41
Sufficiently clear.

Article 42
Sufficiently clear.

Article 43
Sufficiently clear.

Article 44
Sufficiently clear.

Article 45
Sufficiently clear.

Article 46
Sufficiently clear.

Article 47
Sufficiently clear.

Article 48
Sufficiently clear.

Article 49
Sufficiently clear.

Article 50
Sufficiently clear.

Article 51
Letter a
Conditions causing the Business Valuer to be unable to use the Market Approach include, among others, Valuation of:
a. non-operating companies; b. dormant companies; and/or
c. companies that have no operational activities or operations.
Letter b
Sufficiently clear.

Article 52
Sufficiently clear.

Article 53
Sufficiently clear.

Article 54
Sufficiently clear.

Article 55
Sufficiently clear.

Article 56
Sufficiently clear.

Article 57
Sufficiently clear.

Article 58
Sufficiently clear.

Article 59
Letter a
Number 1
Examples of companies where Company Value is highly dependent on fixed asset value (a heavy based on fixed assets company) include, among others, real estate companies. Number 2 Sufficiently clear. Number 3 Examples of companies that do not have an income history but have positive prospects, companies with fluctuating income, or companies whose ability to continue Going Concern is doubted include, among others, newly established companies or companies facing difficulties in obtaining income (troubled companies). Number 4 Sufficiently clear. Number 5 Sufficiently clear. Number 6 Sufficiently clear. Letter b Examples of adjustments to current assets conducted according to the nature of the current assets include, among others:

1. Accounts receivable and receivable equivalents considered in Valuation are those deemed collectible;
2. Marketable securities or participations in other companies are adjusted to Market Value; and
3. Inventory is revalued based on Market Value after deducting costs related to inventory.
   Letter c
   Sufficiently clear.
   Letter d
   Sufficiently clear.
   Letter e
   Sufficiently clear.
   Letter f
   Sufficiently clear.

Article 60
Sufficiently clear.

Article 61
Sufficiently clear.

Article 62
Sufficiently clear.

Article 63
Sufficiently clear.

Article 64
Sufficiently clear.

Article 65
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
Sufficiently clear.
Paragraph (4)
Sufficiently clear.
Paragraph (5)
Sufficiently clear.
Paragraph (6)
Financial statements available to the public are financial statements that have been announced to the public through stock exchange websites or national circulation newspapers. For example, quarterly financial statements or semi-annual financial statements.

Article 66
Sufficiently clear.

Article 67
Sufficiently clear.

Article 68
Sufficiently clear.

Article 69
Sufficiently clear.

Article 70
Sufficiently clear.

Article 71
Sufficiently clear.

Article 72
Sufficiently clear.

Article 73
Sufficiently clear.

Article 74
Sufficiently clear.

Article 75
Sufficiently clear.

Article 76
Sufficiently clear.

Article 77
Sufficiently clear.

Article 78
Sufficiently clear.

Article 79
Sufficiently clear.

Article 80
Sufficiently clear.

Article 81
Sufficiently clear.

Article 82
Sufficiently clear.

Article 83
Sufficiently clear.

Article 84
Sufficiently clear.

Article 85
Sufficiently clear.

Article 86
Sufficiently clear.

Article 87
Sufficiently clear.

Article 88
Sufficiently clear.

Article 89
Sufficiently clear.

Article 90
Sufficiently clear.

Article 91
Sufficiently clear.

Article 92
Sufficiently clear.

Article 93
Sufficiently clear.

Article 94
Sufficiently clear.

Article 95
Sufficiently clear.

Article 96
Sufficiently clear.

Article 97
Sufficiently clear.

Article 98
Sufficiently clear.

Article 99
Paragraph (1)
Sufficiently clear.
Paragraph (2)
Sufficiently clear.
Paragraph (3)
The short form report is a summary of all important information from the Business Valuation Report in the form of a complete report (long form report). Paragraph (4) In the event that the Business Valuer uses definitions and terms other than those established in this Financial Services Authority Regulation, such other definitions and terms must be clearly disclosed in the Business Valuation Report. Paragraph (5) Sufficiently clear. Paragraph (6) Sufficiently clear.

Article 100
Sufficiently clear.

Article 101
Paragraph (1)
The term "specific transactions" includes, among others, transactions in the context of business mergers or consolidations.
Paragraph (2)
Sufficiently clear.

Article 102
Sufficiently clear.

Article 103
The term "specific actions" includes, among others, ordering the improvement of quality control procedures in the valuation process.

Article 104
Sufficiently clear.

Article 105
Sufficiently clear.

Article 106
Sufficiently clear.

Article 107
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6534