Evaluation of Changes in Accounting Standards from SAK ETAP to SAK: Case Study of a Power-Plant Company

Abstract

This study addresses the implementation of changes in accounting standards from those without public accountability (SAK ETAP) to normal financial accounting standards (SAK). Indonesia has three pillars of accounting standards that can be voluntarily chosen. PT A, the subject of our case study, used SAK ETAP until they sought to get fresh funds through an initial public offering. Under financial services authority rules, PT A’s financial statements required to go public had to be prepared using SAK. This study seeks to discover the differences and impacts arising from moving from SAK ETAP to SAK. The various hypotheses tested in the literature concerning the changes in accounting policies show that changes have been made for income smoothing. The biggest impact seems to entail the restatement of financial statements, consolidation principles, deferred taxes, postemployment benefits, financial instruments, and statements of cash flow. The figures of financial position and profit and loss are adjusted, resulting in increased profits and improved financial ratios. This is contradictory to several hypotheses tested in previous studies stating that changes in accounting policies tended to cause income smoothing. Keywords—changes in accounting standards, retrospective application, consolidated financial statements