Expense Recognition Policies

I recently reviewed a document titled "Isu Krusial Pengakuan Beban & Biaya: Perspektif Pajak" by Agus Puji Priyono (Tax Extension Officer, DJP Kanwil Banten), which explores the complexities of cost and expense recognition in Indonesian taxation. 🧾 Key topics include: • Foundations of PPh (Income Tax): Legal construction, realization & matching principles, historical cost, and how expenses correlate with taxable income. • Expense Recognition Rules: ✅ Formal & material requirements ✅ Deductible vs. non-deductible costs ✅ Allocation via depreciation & amortization • Regulatory Provisions: 🔹 PP 45/2019 (Investment Allowance) 🔹 Super deductions (R&D, Vocational Training) 🔹 Expense treatment for: travel, medical, CKP, promotions, zakat, pre-operating, VAT, and more • Asset-Related Issues: 🏗️ Self-built assets (KMS), depreciation rules, asset revaluation, ATUD, biological assets (PSAK 69), and asset disposals post-donation or tax amnesty • Joint Cost Allocation: For mixed-income entities (final vs non-final, taxable vs non-taxable) • Shift in Regulatory Authority: Article 32C delegates more power from MoF (PMK/KMK) to Government Regulations (PP). 🎯 Takeaway: This material is a valuable guide for tax and finance professionals navigating the increasingly detailed and nuanced landscape of tax-compliant expense recognition in Indonesia. #Tax #IndonesianTax #Finance #ExpenseRecognition #Perpajakan #PPh #DJP #Accounting #TaxCompliance #TaxUpdate

Perfect books, but imperfect decisions?  Welcome to deferral accounting. Without deferral accounting, your expenses may not match up with your revenue periods, leading to a skewed view of your company’s financial health. The solution? Align expenses with their actual benefit periods using deferral accounting. Here’s how: 1. Identify prepaid expenses. 2. Set the expense recognition period. 3. Record the initial payment as an asset. 4. Track the deferred expense. 5. Adjust the records as time passes. 6. Review deferrals regularly. 7. Update financial statements as needed. Deferral accounting ensures your reports accurately reflect business activities. This clarity helps with budgeting, forecasting, and strategic planning. Accurate financial reporting isn’t just about compliance—it’s about making smart decisions. Embrace deferral accounting to control your financial narrative. #deferralaccounting  #businessaccounting  #finance 

Accruals and deferrals are fundamental accounting concepts used to ensure that revenues and expenses are recorded in the correct accounting period, following the accrual basis of accounting. *1.Accruals* Accruals refer to revenues or expenses that are recognized before cash is received or paid.These entries help match income and expenses to the correct reporting period. Example: A company incurs employee salaries of ₹50,000 for December, but the payment is made in January. Journal Entry (at December-end): Dr. Salary Expense ₹50,000 Cr. Salaries Payable ₹50,000 (This recognizes the expense in December when it was incurred, even though payment is deferred to January.) Journal Entry (when paid in January): Dr. Salaries Payable ₹50,000 Cr. Cash ₹50,000 (This removes the liability and records the actual cash outflow.) *2. Deferrals* Deferrals refer to revenues or expenses that are recognized after cash is received or paid. These entries help delay the recognition of income or expenses until they are actually earned/incurred. Example: A company pays ₹1,20,000 for a 12-month rent lease in advance (January-December). The expense should be spread across the months, not fully in January. Journal Entry (when paid in January): Dr. Prepaid Rent ₹1,20,000 Cr. Cash ₹1,20,000 (This recognizes the prepaid rent as an asset.) Journal Entry (for monthly expense recognition): Dr. Rent Expense ₹10,000 Cr. Prepaid Rent ₹10,000 (This adjusts the prepaid rent and properly recognizes ₹10,000 per month as an expense.) Both accruals and deferrals ensure accurate financial reporting by aligning expenses and revenues with their respective accounting periods.