On May 28, 2025, the Financial Accounting Standards Board of the Indonesian Institute of Accountants (DSAK IAI) ratified PSAK 118: Presentation and Disclosure in Financial Statements — an adaptation of IFRS 18 Presentation and Disclosure in Financial Statements. This standard will replace PSAK 201 (formerly known as PSAK 1) and becomes effective January 1, 2027. Although still two years away, DSAK IAI has already emphasized that its impact will reach every company across every industry using full IFRS-based SAK — not a niche standard for a specific sector.
The most noticeable change: income statement structure
Until now, income statement presentation has been relatively flexible — companies had considerable leeway in ordering and grouping line items. PSAK 118 ends that flexibility by mandating five fixed categories:
- Operating activities
- Investing activities
- Financing activities
- Income tax
- Discontinued operations
Within that structure, entities are required to present three new subtotals that weren't previously mandatory:
- Operating profit (loss)
- Profit (loss) before financing and income tax
- Profit (loss) for the period (as the closing figure)
The goal is clear: make income statement structure more consistent across companies, so investors and analysts can compare core operating performance without having to dig through footnotes one by one.
A new concept: Management-defined Performance Measures (MPM)
This is the most striking element of PSAK 118 — a concept that didn't exist at all in Indonesian SAK before. In Indonesian, it's called UKTM (Ukuran Kinerja Tetapan Manajemen), the equivalent of Management-defined Performance Measures (MPM): "non-standard" performance measures often used by management in investor presentations — for example, adjusted EBITDA, underlying profit, or similar metrics not directly defined by SAK.
Previously, figures like these commonly appeared in investor materials without being tightly regulated within official financial statements. PSAK 118 changes that: if management communicates such a performance measure to the public, the standard requires formal disclosure in the notes to the financial statements — including a reconciliation to the subtotals defined by PSAK 118. The goal is to let investors assess how far management's "narrative" deviates from standard figures, and prevent it from being misleading.
Aggregation and disaggregation principles
PSAK 118 also affirms that entities must consciously assess whether a line item should be combined (aggregated) or separated (disaggregated) based on its level of materiality:
- Overly combined information risks obscuring matters that should be visible to users.
- Overly detailed information risks burying the big picture under excessive detail.
This demands more active professional judgment from financial statement preparers, rather than simply following a standard template.
What else changes — and what doesn't
| STATEMENT COMPONENT | DEGREE OF CHANGE |
|---|---|
| Income statement | Major change — new category structure & subtotals |
| Notes to financial statements | Major change — MPM disclosure, aggregation/disaggregation principles |
| Cash flow statement | Partially changed |
| Statement of financial position | Minor change |
| Statement of changes in equity | Minor change |
Realistic preparation steps starting now
Two years before 2027 sounds like a long runway, but a financial statement transition at this scale — especially for companies with complex business structures — typically needs more than a full fiscal year of preparation (since comparative periods also need adjusting).
- Train your internal accounting team on the MPM concept, the five income statement categories, and the fundamental difference between "presentation" and "disclosure" under the PSAK 118 framework.
- Simulate your financial statements in the new format as a trial run — this usually surfaces unexpected classification issues before it becomes mandatory.
- Identify non-standard performance measures your management currently uses in investor or bank presentations — since those are what's likely to become mandatory MPM disclosures.
- Involve auditors from the planning stage, not near the deadline. Auditors now also play a role in ensuring management doesn't misjudge materiality thresholds and MPM.
- Evaluate your ERP/accounting system — many reporting systems need reconfiguring to automatically generate the five-category structure, rather than being assembled manually every period.
For companies whose financial statements are used for large credit applications, investor due diligence, or cross-entity group consolidation, preparing for this transition early will be far cheaper than a rushed rebuild as 2027 approaches.
Disclaimer: This article was prepared as general information as of July 6, 2026 and does not constitute tax advice for any specific case. Tax regulations are subject to change. For guidance on your specific business situation, please consult the Sentary Consulting team or a registered tax consultant.