What is accrual accounting?

We record the transaction, if it has actually already happened. We record transactions when
it has already happened. When transactions actually already happen. So you record
transactions in which you don't have to wait until you pay the cash or you receive the cash.
So you record a transaction when you think the transaction has already occurred. You don't
have to wait until it involves cash. The opposite to accrual accounting is cash basis.

Distortion → gangguan.

Revenue is when the company receives the cash or receives cash from the sources.
What is the source of revenue? From the operating activity yeah from operating
Recur → always happens in every period. Or repeat.
Earn → synonym (get).

Example of loss → loss on sales, when we sales the building and we got losses from it.
How do you determine the amount of the losses? From market value and carrying value/
Book value. The cost of assets minus its accumulated depreciation.
Example of something that is included in operating but it is not recurring. It is part of
operating activity but it is non recurring. It only happens once in a while?
Loss on impairment that happens to your inventory. Loss on inventory impairment. Inventory
is company operating activity. But impairment, it's not necessarily recurring. That's why you
recorded it as a loss. Because it is not recurring. Loss means it is not recurring. If it is
recurring then you have to record it by the word expense. Expense means it is recurring. It is
part of your operation and it is recurring.

What is often erroneously referred to as operating incomes. Which income, is it net income,
comprehensive income, continuing or core income? Continuing income. Continuing income
is often erroneously referred to as operating income, whereas continuing income is not the
same as operating income, they are different. That's why some people, even some
accountants, confuse operating income with income from continuing operations.

Pertains Only to → terkait dengan.

Generated → dihasilkan
I.e → yaitu atau adalah

What is the source of non operating incomes? The sources of non operating income comes
from financing and investing activities.

How do you compute comprehensive income?

It's on a slide.
What kind of marketable securities are categorized as other comprehensive income? There
are three types of marketable securities, that is trading, available for sale and held to
maturity. Which one belongs to other comprehensive income?
It is available for sale. Trading is not other comprehensive income. They will be recorded
directly in net income, in calculating net income. But for available for sale, the gain or loss
will be recorded as other comprehensive income.

What does extraordinary mean? Yang luar biasa.

The example of restructuring charges? It is an example of loss. The example is severance
cost. Severance cost is a cost and expenses which employers are legally obligated to
provide or pay to the employee whenever they fire those employees. Severance cost in
Indonesian is pesangon. Severance cost is the payment that you make as an employer
when you fire your employees. So this is non recurring. This is very extraordinary. This just
happens once in a while.
What is the meaning of criteria? Ciri-ciri atau syarat-syarat
Criteria = plural → criterion = singular
Data = plural → datum = singular

What is expropriation and give the synonym? Depreciation

What is the example transaction for companies that involve expropriation? Losses from
expropriation that are extraordinary items. It happens very rarely. Expropriation means the
preparation or disposition. You are being deprived of your entitlement of something.

What is the Indonesian for asset disposal? Pembuangan asset, tapi dalam bahasa English
artinya adalah melepas.

What are ways to dispose of your assets? How can you get rid of your assets? By selling it.
And then by throwing it away like disposing it, literally disposing it. And by being
expropriated. Expropriated, means being foreclosed by someone else or being seized
(dirampas). But expropriation is usually conducted by the government. Expropriation is being
foreclosed by the government.
You are declared a loss in the lawsuit. You lose in the case in the court. Then your asset is
being expropriated by the attorney.
When your asset is expropriated, then your record:
Loss or expropriation on (Dr)
Land or the asset itself (Cr)
If it is seized by the bank, then you call it foreclosed. But if this is conducted by the
government, then it is an expropriation?
Discontinued → sudah tidak terpakai
Disclosed → pengungkapan
Remove → menghilangkan
Voluntary → sukarela
Involuntary → tidak sukarela
The example of accounting principle changes? The company change from FIFO to LIFO.

Retroactive → the antonym is prospective.

So when you change your accounting principle, then you have to restate your financial
statements for two years from this year and prior years.

The example of accounting estimate changes is maybe provision.

Something related to depreciation and how do you change your estimate regarding
depreciation expense? The useful life. So you don't switch your accounting principle, you
just change your estimate. You still use straight lines, but now you revise economic life.
Unusual → tidak biasa
Infrequent → jarang.

Words that begins with ir → irrelevant, irregular

Words that begins with in → in debt date
Words that begins with im → impossible

The words with ending let → starlet (bintang kecil).

Let means kecil

In this chapter we are talking about analyzing operating performance. When analysts
analyze operating performance, they usually look at the income figure. Some analysts prefer
net income and other analysts prefer economic income. Economic income is equals to
comprehensive income.

There are many types of income that are used by analysts to analyze performance,
beginning from the most popular ones are permanent income, net income, operating income,
income from continuing operation, EBIT (earnings before interest and taxes) and
comprehensive income. So analysts have their own ways of analyzing operating
performance.

Permanent income is the component in the statement of income that are recurring, Although
it is not operating. Jadi Permanent income adalah pendapatan atau biaya yang selalu terjadi,
walaupun bukan belum tentu dari bagian operasional, gak harus dari bagian operasi. For
example, like interest expense, interest expense can be financing activities. If it is financing
activity then it is not part of operating activity. So, in permanent income, you have to exclude
extraordinary items, something that is very rare in occurrence or in nature. And then you
have to exclude special items.
Some analysts prefer net income. If I analyze a company's operating performance, then i'll
use the net income number, not operating income.

Other analysts prefer operating income numbers, so revenue minus all operating expenses
like selling expenses, administrative expenses, general expenses and so on.

Rarely few analysts use income from continuing operations and EBIT (earnings before
interest and taxes).

So there are many ways and there is no standard way in which analysts can analyze
operating performance.

Net income is very useful to predict future performance and also future cash flow. Jadi net
income itu bisa memprediksi berapa cash flow yang dihasilkan di tahun-tahun mendatang. If
you want to predict the amount of cash generated by a company, then you can use two
measures. The first one is cash flow from operations. The second one is net income. Net
income is also useful in predicting the future net income itself. Cash flow tidak bisa
memprediksi net income di masa depan.

Net income can predict future net income and also can predict future cash flow. Cash flow is
only useful for predicting future cash flow and it is not very useful in predicting future net
income.

Comprehensive income is net income plus or minus other comprehensive income, can also
be used as a standard for analyzing performance. Some very good analysis, some
extraordinary analysts use comprehensive income to predict the future performance of a
company. Comprehensive income can be used to predict cash flow and can be also used to
predict bankruptcy.

So we can use many numbers to represent companies operating performance, but we

should bear in mind that the income number, whatever income that we use, can be
manipulated by earnings management. So before we use any income numbers, we have to
make sure and we have to confirm the existence of earnings management. If there is any
earnings management action, then we should not rely on our prediction on income number
because the income number is manipulated by earnings management. We should adjust the
income number first by removing the effect of earnings management.

Earnings management can be conducted by changing accounting principles or by changing

accounting estimates. Some companies conduct earnings management. Kalo ketauan, then
in our review analyst writes a written report, that is called review. In those reviews we will
expose the earnings management conducted by the company.

So before we use any income number, we have to verify the existence of earnings
management. If earnings management is present, then we have to adjust the income
number to remove the effect of the earnings management. Only after conducting those
adjustments can we proceed to using the income number for analyzing performance.
The most popular one is permanent income. Permanent income means the income number
only involves recurring items. Nonrecurring is removed, although the nonrecurring item
involves operating activities, yang penting di remove. We are only concerned about recurring
items. The second most popular one is net income.

Perusahaan investasi (firm investment), they do invest in some stocks. And usually if it's a
normal company, we record this stock's investment into financing or investing activities, not
operating but for Saratoga Investama, where do they record it on operating or else?

Saratoga Investama is an investment company, it is an investment management company.

So when they invest in something they record operating activities. They only record for their
investing activities, the purchase or the sales of fixed assets. When they obtain loans from
the banks, they are recorded in financing activities. The problem with Saratoga, Saratoga is
owned by keluarga Uno. The problem with Saratoga is people are confused in categorizing
Saratoga, whether it belongs to non financial companies or financial companies. Saratoga in
its charter, it is involved in general trading. So it can trade anything, ranging from shares,
extending from shares to fixed assets. It is in firm investment because it can invest in
marketable securities, but it can also influence fixed assets. Saratoga has inventory,
therefore it cannot belong to a financial company. Tapi kalo dia masuk ke non financial
company, it conducts investment, sementara investment is characteristics of financial
companies. So, many companies in Indonesia that deal with general trading operation.This
will be very hard to categorize these kinds of companies into financial or non financial
companies.