Indonesia: PSAK 118: A conceptual shift in financial performance reporting
- ASEAN Newsflash – Q3 2026
- More consistent performance structure
- New required subtotals
- Greater transparency over management-defined performance measures (MPMs)
Tom PagelsPartner
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The transition from IAS 1 to IFRS 18 introduces a new approach to presenting financial performance. In Indonesia, PSAK 118 adopts IFRS 18 and replaces PSAK 201 for annual reporting periods beginning on or after 1 January 2027, with early adoption permitted.
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Overview
PSAK 118 applies to entities preparing general purpose financial statements in accordance with Indonesian Financial Accounting Standards (“SAK”), regardless of whether they are subject to audit. Entities reporting under full SAK are required to apply PSAK 118, whereas those applying other reporting frameworks, such as SAK for Private Entities (“SAK Entitas Privat”), are generally not required.
Conceptually, PSAK 118 does not change the recognition or measurement of transactions. Instead, it introduces a more structured statement of profit or loss, mandatory subtotals, and enhanced disclosure requirements for management-defined performance measures (MPMs).
Key conceptual changes
- A more consistent performance structure
Income and expenses are classified into operating, investing, financing, income tax, and discontinued operations categories. - New required subtotals
Operating profit and profit before financing and income taxes will become key reference points for users of financial statements. - Greater transparency over management-defined performance measures (MPMs)
Management-defined performance measures, such as adjusted EBITDA, must be clearly explained and reconciled. - Clearer presentation discipline
Similar items should be aggregated, while materially different items should be disaggregated to avoid obscuring useful information.
Why it matters
PSAK 118 essentially improves how financial performance is communicated. It aims to make financial statements more comparable, easier to understand, and more aligned with how investors and other users assess performance.
Failure to comply with PSAK 118 after its effective date may result in non-compliance with Indonesian Financial Accounting Standards and could lead to audit findings or a modified audit opinion if the impact is material. Early preparation will help organizations ensure compliance and achieve a smooth transition.
Preparation Focus
Companies should start by assessing their current profit or loss presentation, identifying management-defined performance measures used in external reporting, reviewing accounts mapping charts, and preparing finance teams for the 2027 transition and implementation.
Key Takeaway
PSAK 118 marks a shift from flexible presentation toward a more disciplined and transparent reporting framework. Early preparation will help organizations manage the transition smoothly and improve the clarity of financial reporting.
RÖDL’s Support
RÖDL can support organizations through impact assessments, gap analyses, accounting policy updates, workshops, and implementation assistance for PSAK 118 readiness.
