Five Profit or Loss Categories in PSAK 118

The Financial Accounting Standards Board of the Institute of Indonesia Chartered Accountants approved PSAK 118 Presentation and Disclosure in Financial Statements on 28 May 2025. It is based on IFRS 18 and applies to annual reporting periods beginning on or after 1 January 2027.

Paragraph C08 says PSAK 118 replaces PSAK 201 Presentation of Financial Statements, formerly numbered PSAK 1. Early application is allowed if that fact is disclosed in the notes (paragraph C01).

There are two adjustments to IFRS 18. Paragraph 02a excludes sharia entities, whose presentation falls under PSAK 401. Appendix A adapts the definitions to the Indonesian standards and the roles of the local standard setters and the capital market regulator.

Five categories and two subtotals

Under paragraph 47, each item of income and expense in profit or loss falls into one of five categories: operating, investing, financing, income taxes and discontinued operations.

Paragraph 69 then requires three totals and subtotals. The first is operating profit or loss, the sum of all items in the operating category. The second is profit or loss before financing and income taxes, which is operating profit plus items in the investing category. The third is profit or loss for the period.

The second subtotal is not presented by certain entities. Paragraph 73 exempts those choosing the policy in paragraph 65(a)(ii), which places income and expenses from liabilities unrelated to customer financing in the operating category.

For most trading and service companies, the change felt first is in the operating profit subtotal. Companies have so far built it on their own definitions. From 2027 its content follows the categories, so items once placed below operating profit may move above it, or the reverse.

Management’s performance figures enter the notes

Many boards use their own figures with shareholders or banks, such as adjusted operating profit. PSAK 118 calls these management-defined performance measures. Paragraph 117 defines them as subtotals of income and expenses used in public communications outside the financial statements to convey management’s view of performance.

Paragraph 122 requires all such measures to be disclosed in one note. That note states that the figures reflect management’s view and may not be comparable with measures of other entities.

Paragraph 123 lists what is disclosed for each measure, including how it is calculated and a reconciliation to the nearest subtotal required by the standard. A figure that used to appear only in a slide deck therefore enters the audited notes.

2026 comparatives

Paragraph C02 requires retrospective application under PSAK 208. For calendar-year companies, the 2027 statements present 2026 under the five-category structure as comparatives.

Paragraph C03 adds one disclosure in the first annual statements: a reconciliation for each profit or loss line of the nearest comparative period, starting from the restated amounts.

Preparation therefore falls on the 2026 books. First, tag each income and expense account in the general ledger with its category. Next, collect the figures directors use outside the financial statements from board papers, annual reports and bank presentations. Then compare profit definitions in loan agreements with the new subtotals, because a ratio based on operating profit can shift even though the business has not changed.

Ratio covenants are covered in more detail in the Indonesian article on loan agreement ratios.