London Sumatra: Financial Accounting

Responsible Alpha

A PwC report comparing Indonesia’s Financial Accounting Standards Board (DSAK) and its PSAK standards with IFRS standards found mostly consistency between the two sets of standards. But there continue to be notable differences which have material effects on comparability. London Sumatra, an Indonesian palm oil company, prepares its financial statements in accordance with the Indonesian Financial Reporting Standards (PSAK). These standards use historical cost accounting, rather than fair value accounting. Indonesia’s partial adoption of IFRS and London Sumatra’s use of PSAK not only affect comparability with peer companies, but also means that their financial reporting makes comparisons more difficult, or even risky.