ISAK 35

PRESENTATION OF
FINANCIAL
STATEMENTS OF NON-
PROFIT ORIENTED
ENTITIES

1
Introduction
 Reference
 PSAK 1: Presentation of Financial Statements
 Background
 PSAK 1 – appropriate terminology for profit-ornate entities. If an entity
with a non-profit activity applies PSAK 1 then it is necessary to customize
the description.
 The scope of PSAK 1 in substance has covered the scope of presentation
of Financial Statements entities with non-profit activities.
 PSAK 1 does not provide guidelines for the presentation of Financial
Statements non-profit oriented entities
 Non-profit oriented entities differ in:
 How to obtain resources does not expect repayment or economic
benefits are not comparable to the resources provided.

2 2
Introduction
Scope
 Applies to non-term oriented entities regardless of the form of legal
entity.
 Also applies to ETAP.
 Applied specifically to the presentation of financial statements

Problems
This interpretation discusses how non-profit oriented entities make
adjustments:
 This interpretation discusses how non-profit oriented entities make
adjustments:
 Description used in the financial statement itself

3 3
Interpretation
 The presentation of financial statements of non-profit oriented entities is
prepared with due regard to the requirements, report structure and minimum
requirements set forth in PSAK 1. (par 09)
 Non-profit oriented entities can make adjustments to descriptions used for
multiple posts in financial statements. Example: resource restrictions (par 10)
 Non-profit oriented entities can make adjustments to the descriptions used on
financial statements. For example, the title of the report changes the net asset to
reflect a function that is more in accordance with the content of the financial
statements. (par 11)
 Non-business oriented entities still consider all facts and circumstances in
presenting financial statements including records of LK, so as not to affect the
quality of information presented in .

4 4
Effective Date
 For the financial year period beginning on or after January 1, 2020

5 5
Basic Conclusions
Basic Conclusion completes but is not part of ISAK 35
 In one standard with the same tier set the presentation of different financial
statements shows the inconsistency of the settings (PSAK 1 and PSAK 45). The scope
of PSAK 1 is understood as if it only applies to profit-oriented entities.
 PSAK 1 uses terminology suitable for profit-oriented entities including public sector
business entities. If the entity is non-profit oriented, it can customize the
description of some posts. The scope of PSAK 1 in substance covers the scope of
presentation of Financial Statements with non-profit activities.
 EBNL (non-profit oriented entities) and EBL (profit-oriented entities) differ in
obtaining resources that do not expect repayment or balanced economic benefits.
The concept of recognition, measurement, presentation and disclosure for the same
thing more precisely refers to the existing arrangements in SAK and SAK ETAP.

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Basic Conclusions
Scope and Problems
 ISAK 35 provides guidance on the presentation of financial statements on the
EBNL
 Also applies to SAK ETAP
 Does not provide definitions or criteria for distinguishing EBNL and EBL.
 Entities conduct their own assessments to determine whether EBL or EBNL.
Several factors are considered:
 Whether the resource is proportional to the number of resources provided..
 Produce goods/services without the purpose of cultivating profit, the amount is not
distributed to the founder or owner
 There is no ownership like most EBL pads. Non-sale, transferable, redeemable or
proprietary ownership does not reflect the proportion of my share of the source on
liquidation

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Basic Conclusions
Interpretation
 IAS 1 par 5 allows EBNL to customize the descriptions used for some posts
contained in Financial Statements and Financial Statements itself. PSAK 1 does
not provide explanations and examples of more such adjustments.
 Interpretation includes illustrations of Financial Position Statements,
Comprehensive Income Statements, Net Asset Change Reports and Cash Flow
Statements and Notes on Financial Statements.
 The examples in the interpretation are not intended to illustrate all aspects of
sak or include the appropriate form for EBNL. Examples may differ from the
conditions found in the EBNL.

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Illustration Example
 Financial Position Report
 Offering comprehensive income posts on the share of net assets without
restrictions
 Presenting other comprehensive income posts individually
 Comprehensive Income Report
 Single column
 Presents information according to net asset classification
 Net Asset Change Report
 Cash flow statement
 Notes on Financial Statements

9 9
Financial
Position Report

10
Financial
Position Report

11
Comprehensive
Income Report

12
Comprehensive
Income Report

13
Net Asset
Change Report

14
Cash Flow
Statement

15
Notes on
Financial
Statements

16
Notes on
Financial
Statements

17
 UNIVERSITY OF INDONESIA AND SUBSIDIARIES
FINANCIAL POSITION REPORT, DECEMBER 31, 2019
(Declared in millions of Rupiah, unless otherwise stated)

Statement of
Financial Position
- Assets

Re-presentation of
Financial Statements 2018
as the entity uses PSAK
and consolidates
investments in subsidiaries

Ref: UI Financial Report 2019 _ PSAK &PSAK 45 18

 UNIVERSITY OF INDONESIA AND SUBSIDIARIES
FINANCIAL POSITION REPORT, DECEMBER 31, 2019
(Declared in millions of Rupiah, unless otherwise stated)

Statement of Financial
Position – Liabilities
and Net Assets

Re-presentation of LK
2018 as the entity uses
PSAK and consolidates
investments in
subsidiaries

Ref: UI Financial Report 2019 _ PSAK &PSAK 45 19

 UNIVERSITY OF INDONESIA AND SUBSIDIARIES
CONSOLIDATED ACTIVITY REPORTCONSOLIDATED ACTIVITY REPORT
FOR THE YEAR ENDED DECEMBER 31, 2019
(Declared in millions of Rupiah, unless otherwise stated)

Changes in
Uncommitted Net
Assets

Re-presentation of LK
2018 as the entity uses
PSAK and consolidates
investments in
subsidiaries

Ref: UI Financial Report 2019 _ PSAK &PSAK 45 20

 UNIVERSITY OF INDONESIA AND SUBSIDIARIES
CONSOLIDATED ACTIVITY REPORT
CONSOLIDATED ACTIVITY REPORT
(Declared in millions of Rupiah, unless otherwise stated)

Temporary
Bonded Net Asset
Changes

Re-presentation of LK 2018
as the entity uses PSAK and
consolidates investments in
subsidiaries

Ref: UI Financial Report 2019 _ PSAK &PSAK 45 21

 UNIVERSITAS INDONESIA AND SUBSIDIARIES
CONSOLIDATED ACTIVITY REPORT
FOR THE YEAR ENDED DECEMBER 31, 2019
(Declared in millions of Rupiah, unless otherwise stated)

Changes in Permanently
Bound Net Assets and
Other Comprehensive
Income

Re-presentation of LK 2018
as the entity uses PSAK and
consolidates investments in
subsidiaries

Ref: UI Financial Report 2019 _ PSAK &PSAK 45 22

 UNIVERSITY OF INDONESIA AND SUBSIDIARIES
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2019
(Declared in millions of Rupiah, unless otherwise stated)

Operating Cash
Flow

Re-presentation of LK 2018
as the entity uses PSAK and
consolidates investments in
subsidiaries

Ref: UI Financial Report 2019 _ PSAK &PSAK 45 23

 UNIVERSITY OF INDONESIA AND SUBSIDIARIES
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2019
(Declared in millions of Rupiah, unless otherwise stated)

Investment and
Funding Cash Flow

Re-presentation of LK 2018
as the entity uses PSAK and
consolidates investments in
subsidiaries

Ref: UI Financial Report 2019 _ PSAK &PSAK 45 24

 PSAK 45
FINANCIAL
REPORTING OF
NON PROFIT
ENTITIES

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 Non-profit Accounting Standards PSAK 45
Application
Set the types of
financial reports and • PSAK 45 and PSAK for non-
illustrations of each profit organizations with
significant public accountability
report
• PSAK 45 and SAK ETAP for non-
profit organizations with
insignificant public
accountability

Developed by PSAK Must be applied

with PSAK or SAK
adopting SFAS 117
45 ETAP

Examples of its application in Can be applied to

the Education, Health government organizational
Foundation LK units if regulations permit.

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 PSAK 45 Financial Reporting of Non-Profit Entities

• This Standard specifies certain basic information to be presented in the

financial statements of non-profit entities.
• Regulations that are not regulated in this Statement refer to SAK, or SAK ETAP
for entities that do not have significant public accountability.
• Purpose:
• Regulate the financial reporting of non-profit entities.
• The financial statements of non-profit entities can be easier to
understand, have relevance, and have high comparability.
• Special arrangement:
• The components and names of financial statements are different
• Net assets - classified into:
• Unrestricted net assets
• Bonded net assets: permanent or temporary.

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Non-Profit Entity Financial Statements

Statement of financial position (balance sheet) at the

end of the reporting period

Activity reports for a reporting period

Statement of cash flows for a reporting period

Notes to financial statements

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 Non-profit Entity- PSAK 45

• Differences  the way the organization obtains resources

• Nonprofits  derive their resources from donations from members and
donors who don't expect anything in return
• There are organizations that finance their capital needs from debt and
their operating needs from revenue on services.
• The financial statements provide an overview of financial performance
 Presents separately bound and non-binding assets.
• The manager's accountability regarding their ability to manage
organizational resources received from donors is presented through
activity reports and cash flow reports.

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 Scope of PSAK 45
• Financial statements provided by non-profit organizations as following characteristics:
• The resources of a not-for-profit entity come from contributor who do not expect a
repayment or economic benefit proportionate to the amount of resources provided.
• Produce goods and / or services without the purpose of making a profit, and if the non-profit
entity generates profits it is not distributed to the founders or owners of the non-profit
entity.
• There is no customary ownership interest in a business entity, ownership in a non-profit
entity cannot be sold or reflects a proportionate share of resources when the non-profit
entity is liquidated or dissolved.

Can be applied by government agencies and other similar units as long as

they not contradicting with the applicable laws and regulations.

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 The application of PSAK 45

• This Standard specifies certain basic information that is presented

in the financial statements of non-profit entities.

• Regulations that are not regulated in this Statement refer to SAK, or

SAK ETAP for entities that do not have significant public
accountability.

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 Definition

• Permanent restrictions are restrictions on the use of resources set by contributor so that
these resources are permanently maintained, but the organization is allowed to use some or
all of the income or other economic benefits that come from these resources.
• Temporary restrictions are restrictions on the use of resources by contributors that maintain
these resources until a certain period or until certain conditions are fulfilled.
• A binding contribution is a resource whose use is limited for a specific purpose by the
contributor. These restrictions can be permanent or temporary.
• Unbound contribution are resources whose use is not restricted for a specific purpose by the
contributor.

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 Non-Profit Entity's Funds or Net Assets

• Not bound
Funds can be used for the purposes of non-profit entities without being restricted by binding
regulations. Entities are more flexible to spend for this type of contribution.
• Temporarily bound
Contributions that are included in a temporary bond are caused by a limited purpose for a certain
period. Some institutions use a time limit of up to 5 years before being withdrawn or switched to an
unbound type (Ruppel, 2007).
• Permanently bound
The characteristics of this type require non-profit entities to allocate to certain types of assets, keep
them permanently and allow them to benefit from them, for example waqf. The results of the
investment can be classified as unbound or temporarily bound.

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 Purpose of financial statements
• The main objective is to provide information that is relevant to the interests of
contributor, members of non-profit entities, creditors, and others who provide
resources to the non-profit entity.
• To provide information regarding:
• The number and characteristic of the assets, liabilities and net assets of an
organization.
• The effects of transactions, other events and situations that change the value and
characteristic of net assets.
• The types and quantities of resource inflows and outflows in a period and the
relationship between them.
• The way an organization obtains and spends cash, obtains loans and paying loans,
and other factors that affect its liquidity.
• The service business of an organization.

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 Statement of Financial Position
• Purpose  to provide information about assets, liabilities and net assets and information about the
relationship between these elements at a specific time.
• Information in the statement of financial position, which is used together with disclosures and
information in other financial statements, can help contributors, members of the organization,
creditors and other parties to assess:
• the organization's ability to provide services in a sustainable manner
• liquidity, financial flexibility, ability to fulfill its responsibility, and external funding needs.
• The statement of financial position presents total assets, liabilities and net assets:
• presents assets based on the order of liquidity, and liabilities based on the maturity date;
• classifying assets into current and non-current, and liabilities into short term and long term;
• disclose information about the liquidity of assets or the maturity of a liability, including restrictions on the
use of assets, in the notes to financial statements.

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 Net Asset Classification

• The statement of financial position presents the amount of each group of net
assets based on the restrictions by the contributors, namely: permanently
bound, temporarily bound, and not bound.

• Information about the characteristic and amount of permanent or temporary

restrictions is disclosed by presenting that amount in the financial statements
or in the notes to the financial statements.

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 Activity Reports Purposes
• The main purpose of activity reports is to provide information about:
• the effect of transactions and other events that change the amount and characteristic of net
assets,
• relationships between transactions and other events,
• how the use of resources in implementing various programs or services,
• Information in activity reports, which is used with disclosure of information in other
financial reports, can help contributor, organizational members, creditors and other
parties to:
• evaluate performance in a period,
• an assessment of the efforts, capabilities, and sustainability of the organization and providing
services,
• assessment of the implementation of responsibilities and performance of managers.

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 Activity Report

• The activity report covers the whole organization and presents the changes in net
assets during a period.
• Changes in net assets in the activity report are reflected in net assets or equity in
the statement of financial position.
• The activity report presents the amount of changes in net assets permanently
bound, temporarily bound, and not bound during a period.
• The activity report presents the total income and expenses on a gross basis,
except it is regulated by other SAK or SAK ETAP.

38
 Activity Report Classification

• The activity report provides:

• income as an addition to unrestricted net assets
• expenses as a deduction for unrestricted net assets.
• Contributions are presented as additions to net assets that are permanently bound,
temporarily bound, and not bound, depending on the restrictions.
• Unrestricted contributions, which the restrictions no longer apply in the same period,
may be presented as unrestricted contributions  are consistently presented and
disclosed as accounting policy.
• The activity report presents the gains and losses recognized on investments and other
assets (or liabilities) as increases or decreases to unrestricted net assets, except if the
use is restricted.

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 Service Provision Information

• Activity reports or notes to financial statements must present information about

expenses according to functional classifications, such as by groups of major service
plans and supporting activities.
• Recommended to provide additional information regarding loads by their
characteristic.
• Service provision programs are activities to provide goods and services to
beneficiaries, customers or members in order to achieve the goals or mission of a non-
profit entity.
• The provision of these services is the main objective and outcome implemented
through various main programs.

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 Statement of Cash Flow

• The main purpose of a cash flow statement is to present information about cash receipts
and payments during a period.
• The cash flow statement is presented in accordance with PSAK 2 concerning Statement of
Cash Flows with the following additions:
• Funding activities:
• cash receipts from contribitor whose use is limited for the long term.
• cash receipts from contribution and investment income, the use of which is
restricted for the purpose of obtaining, building and maintaining fixed assets, or
increasing an endowment.
• interest and dividends that are restricted in long-term use.
• Disclosure of information regarding non-cash investing and financing activities:
contribution in the form of buildings or investment assets.

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 ISSUE
FINANCIAL
STATEMENTS
NON PROFIT
ENTITIES

42
 Accounting Standards Used
• Foundations are established to support educational institutions or hospitals.
• Accounting standards to be selected:
• PSAK
• If the foundation is national / international scale
• Requires broad accountability
• The organization's activities are complex, for example a company is formed and
owned by the Foundation
• SAK ETAP
• If the foundation is national / international in scale and its accountability is limited
• The organizational activities are not complex
• SAK EMKM
• Not recommended because Public Sector Entities should have Public Accountability

43
 Name of Financial Report
• Whether non-profit-oriented entities may have their financial statements in accordance
with PSAK 45, only 4 financial statements.
• Financial statement components and names
• The financial statement components should follow PSAK 1 and remain complete as many as 5
reports  add Change in Net Assets Report.
• For the name of the Activity Report it can be maintained or can use another name if the entity
wants to change it.
• The use of the name of the net asset account and the limitation on net assets: can be maintained
if the EBNL circumstances reflect these conditions. However, it can also be changed because
other names are more appropriate, for example using the name of equity because EBNL is owned
or part of a government entity and so it is part of the assets owned by the state.
• If there are no other changes in net assets, except those that have been presented in the
activity report, the entity is permitted not to present a report of changes in net assets.
Changes in net assets will automatically add to the opening balance of net assets to
produce the final net assets in the statement of financial position (Ref SAK ETAP)

44
 Consolidated Financial Statements
• The foundation has a non-profit oriented business unit, for example it owns a
commercial company
• Accounting standards to be selected:
• PSAK
• The financial statements of the Foundation must consolidate the business entities
it owns in the financial statements of the Foundation.
• SAK ETAP
• Ownership of companies will be recognized as investment which is recorded
using the equity method
• The use of the equity method will eliminate the reporting of company activities
under the Foundation, because the value of income, expenses, assets and
liabilities is not visible in LK Foundation.

45
 Employee Honorarium
• Does the foundation recognize post-employment honorarium responsibility for its
employees.
• Such foundations have an responsibility to comply with the provisions of contractual
agreements with workers or the Manpower Act.
• All consequences of payments to workers are recognized in the financial statements:
• If in the work contract agreement, the employee is entitled to a pension and severance pay at the
end of the service period, a defined benefit responsibility will be recognized.
• If there is no such provision in the work contract, the responsibility of honorarium will be
calculated in accordance with the provisions of the Manpower Law
• An entity recognizes a defined benefit responsibility in accordance with the provisions of
PSAK / SAK ETAP

46
 Does the Foundation Pay Taxes

• There is no provisions in the Income Tax Law that excludes a foundation from being a tax
subject.
• The criteria for an entity as a tax subject in the Income Tax Law include limited liability
companies, limited liability companies, other companies, BUMN / BUMD with any name and
form, firms, partnerships, cooperatives, pension funds, associations, associations, foundations,
mass organizations, socio-political or other organizations, institutions and other forms of
bodies including collective investment contracts.
• Foundations have tax responsibility
• The net income earned will be taxed and reported in the annual SPT.
• With holding as the withholding party - on the income received from the other party, will be tax
deductible
• With holding as a party withholding taxes - when paying expenses which are income of other parties,
have an obligation to withhold taxes - PPh 21; PPh 23; PPh 4 (2)
• Special provisions apply to education providers

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 Does the Education Foundation Pay Taxes
• Educational foundations are like other foundations, but there are some exceptions related to income
received and taxes on the surplus invested in education and development facilities and infrastructure.
• The exceptions for revenues that are not subject to income tax, which constitute a tax incentive from the
government, include;
• Profits in the form of the difference between the market price and the acquisition value or book value of the
transfer of assets in the form of assistance or donations and grants received by educational bodies
• Grant assets received by educational bodies
• The excess that is received or obtained by non-profit organizations engaged in education and / or research and
development, will receive tax facilities in the form of tax exemptions as long as the excess is reinvested in the form
of facilities and infrastructure for educational and / or research and development activities which are conducted
openly. to any party and fulfill certain other conditions. The reinvestment of the excess must be realized within 4
(four) years from the time the excess (taxable net profit) is received or earned.
• Use of surplus
• Purchase or construction of buildings and infrastructure for education, research and development including the
purchase of land as the location for the construction of such buildings and infrastructure;
• Procurement of facilities and infrastructure for offices, laboratories and libraries,
• Purchase / construction of student dormitories, official homes for teachers, lecturers or employees, and sports
infrastructure, as long as they are in the environment / location of formal educational institutions.
• If an educational institution earns income other than the donations and donations made to the
educational body (institution), then the income it receives is taxable.

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