Fixed Asset Management in Indonesia
In Indonesia, there are few companies that have introduced fixed asset management system, and most of Japanese companies manage the following information in Excel for fixed asset ledger
- Fixed asset code
- Acquisition date
- Acquired Value
- Type of fixed assets: Buildings, structures, vehicles, and equipment
- Depreciation method: fixed rate method
- Durability: 4 years, 8 years, 12 years, 20 years
- Amortization start date
- Scheduled completion date of amortization2. Classification information: Mainly used as a cutoff for report output, and the method of classification differs by company
- Location
- Department
- Group
Items that can be expensed as fixed assets in Indonesia are categorized according to their useful life.
- Category 1 (useful life of 4 years: 50% fixed rate, 25% fixed rate)
Office equipment (PCs, printers, desks, chairs, etc.), mobile phones, etc. - Category 2 (useful life of 8 years: 25% fixed rate, 12.5% fixed rate)
Company car, AC, etc. - Category 3 (useful life of 12 years: 12.5% fixed rate and 6.25% fixed rate)
Molding machines, press machines, etc. - Category 4 (useful life of 20 years: 10% fixed rate, 5% fixed rate)
The function of the fixed asset management system is to manage information such as "when and at what price" and "how much depreciation period remains", and to automatically generate a depreciation journal at the end of the month based on this information.
Fixed Asset Management System Features
Acquisition
By entering the acquisition in the fixed asset management system, there are also cases in which a debt journal is generated in the ERP debt management. On the other hand, it may be automatically registered in the fixed asset ledger of the fixed asset management system by processing the incoming goods from the ERP purchasing management.
- Dr. Vehicle-Production（Increase in assets） Cr. AP（Increase in debt
In the case that fixed assets are purchased in foreign currencies such as USD or YEN as well as IDR, impairment should be made in the currency of the acquisition, so the journal entries generated at the time of acquisition should have a currency code.
Depreciation
Tangible fixed assets are classified into categories such as buildings, structures, vehicles and equipment, and the aggregate amount for each category calculated by the declining-balance method or the straight-line method in Excel is recorded as a negative asset by the indirect method.
This is done in the settlement of accounts at the end of the month in order to show the accumulated amount of depreciation under the acquisition cost of fixed assets on the B/S.
- Dr. Depreciation（Increase in expense） Cr. Accumulated depreciation（Increase in negative assets）
In the case of intangible assets (e.g., software), we expensed the asset using the Cartesian method.
- Dr. Amotization（Increase in expense） Cr. Intangible fixed asset（Decrease in assets）
Transfer
Although there is no expense for the transfer of fixed assets, if the profit and loss is managed by any aggregate unit such as department, line or machine, an offsetting journal is required to reassign the aggregate group.
- Dr. Vehicle（Increase in asset） Cr. Vehicle（Decrease in assets）
If you want to aggregate assets by department in the accounting system, department codes are required for fixed asset items in the G/L.
Impairment loss and Extraordinary loss
However, IFRS allows reversal of impaired fixed assets, which is not allowed in Japan.
This is because IFRS requires financial statements that clearly reflect the actual state of the company's assets, and in a sense it makes sense to argue that even once an asset has been devalued, if the valuation rises again, it should be reflected in the asset's valuation.
- Dr. Impairment loss（Increase in expense） Cr. Accumulated impairment loss（Increase in minus asset）
Retirement and Disposal
Retirement means taking the asset out of use, putting it under separate management and treating it as stored goods, while disposal is recorded as loss on disposal of fixed assets (expense account) without a valuation.
- Dr. Accumulated depreciation（Decrease in minus asset） Cr. Vehicle（Decrease in asset）
- Dr. Accumulated impairment loss（Decrease in minus asset）
- Dr. Loss on disposal（Increase in expense）
Sales
If the sale price is higher than the remained value at the time of sale, the profit on sale is recorded, and if it is lower, the loss on sale is recorded.
- Dr. Accumulated depreciation（Decrease in minus asset） Cr. Vehicle（Decrease in asset）
- Dr. Accumulated impairment loss（Decrease in minus asset）
- Dr. Accrued income（Increase in asset）
- Dr. Loss on sales（Increase in expense）
Lease and Construction in Progress
In addition to fixed assets, the function of the fixed asset management system includes contract management, such as the amount of payments and re-leasing, from the start to the expiration of the lease asset.
It also generates a construction in progress journal to manage construction, materials, labor and expenses that have been paid in advance or provisionally until the completion of the construction or delivery of the building, etc., for the construction or production of tangible fixed assets.
As another case, when production equipment is imported from Japan under a FOB contract, it is recorded in construction in progress during the period of onboard inventory and transferred to property, plant and equipment upon arrival in Indonesia.
Dr. construction in progress Cr. AP
Dr. Tangible fixed assets Cr. construction in progress
Depreciation calculation
In the case of Indonesia, depreciation is calculated on a monthly basis. However, if you have a problem with the disparity of one day rather than one vote, you may calculate the depreciation amount on a daily basis if the period of use of a fixed asset acquired on the 1st and 31st of the month is very different from the 31st of the month, but the depreciation amount for this month is the same.
However, in the case of monthly calculation, the fixed assets acquired within the month are uniformly depreciated as if they were used for one month, so naturally, more expenses are recorded than daily calculation, so it is advantageous for tax purposes.
Straight-line method
Since the fixed amount method can reduce the initial cost burden, it is suitable for start-up companies that want to make a quick profit or those that focus on this.
- Depreciation = Acquisition cost x Depreciation rate
declining balance method
Indonesia is currently booming and for companies with strong sales growth, it is a good idea to expense early to reduce profits and save tax while at the same time getting a faster return on investment.
I bought it just a year ago for about 165 juta, but if I sell it now, it will probably be about 145 juta (20 juta down).
However, when selling it next year, it is not the case that 20 juta falls further, but it becomes about 140 juta, and the constant rate method is the idea that it falls slowly afterwards though it falls with a thud at first in the same way.
- Depreciation expense = high outstanding salvage (acquired value - accumulated salvage) x salvage rate
Linking physical labels and fixed asset ledgers
In many cases, fixed asset codes are barcoded to link inventory information in the form of fixed asset ledgers, such as "what is where" and "when and at what price" on the system, with the physical labels attached to the actual items.