The History of Financial Accounting Standard

The beginning of the history of the existence of financial accounting standards in Indonesia was
when the active capital market in Indonesia was held in 1973. In 1973 a Committee for
Collecting Materials and Structure of GAAP and GAAS was formed. In the same year, the
Indonesian Accounting Principles Committee (PAI Committee) was formed which was tasked
with preparing financial standards. This is the initial period for IAI to apply the accounting
standard system in Indonesia as outlined in the book entitled "Indonesian Accounting Principles
(PAI)."

The PAI Committee has been in charge for four periods of IAI management from 1974 to 1994
with an updated personnel structure. Furthermore, in the period of IAI management in 1994-
1998 the name of the PAI Committee was changed to the Financial Accounting Standards
Committee (SAK Committee), then at the VIII Congress, September 23-24, 1998 in Jakarta, the
SAK Committee was changed to the Board of Financial Accounting Standard for 1998 to 2000
and given autonomy to formulate and approve PSAK.

In 1984, the PAI committee made a revised accounting standard in a more basic way compared
to the 1973 PAI and codified it in a book entitled "Indonesian Accounting Principles 1984". The
principle has the purpose to make a conformity with accounting provisions that can be applied in
the business world.

In 1994, IAI has carried out various steps of harmonization using international accounting
standards in the process of developing accounting standards and making total revisions to the
1984 PAI and has since issued a series of financial standards named Financial Accounting
Standards (SAK) issued since October 1, 1994. Financial Accounting Standard (SAK) is defined
as the accounting standard in Indonesia. The development of the third accounting standard is
intended to meet the needs of the business world and the accounting profession in order to
follow and anticipate international developments. Many of the standards issued are in
accordance with or equal to international accounting standards issued by the IASC.

There are currently two Rules of Financial Accounting Standards (PSAK) issued by 2 Boards of
Financial Accounting Standard, namely:

1. Conventional PSAK
2. Syariah PSAK

After harmonization changed becomes adaptation, then the adoption is carried out in order to
convergence with International Financing Standards (IFRS). Adoption is carried out in full with
the aim of achieving convergence against IFRS so that financial accounting standards can be
implemented better in the future.

In the process of developing financial accounting standards, several revisions were carried out
continuously, namely the preparation or addition of the standard itself. Since 1994, it has been
carried out about six times the revision until 2007. In the revision, a number of standards were
added, namely KDPPLK Syariah, 5 revised PSAK, and 6 new PSAK. Currently there are 2
KDPPLK, 7 ISAK and 62 PSAK.

From 1994 to 2004, there was a change from US GAAP to IFRS, this was demonstrated since
1994, has become a policy of the Financial Accounting Standards Committee to use
International Accounting Standards as a basis for building Indonesian financial accounting
standards. And in 1995, IAI made a major revision to apply new accounting standards, most of
which were consistent with the IAS. Some standards are adopted from US GAAP and others
are self-made.

IFRS Phase 1 convergence, from 1995 to 2010, the book on Financial Accounting Standards
(SAK) continues to be revised continuously, both in the form of improvements and the addition
of new standards. The revision process was carried out six times, namely on October 1, 1995,
June 1, 1999, April 1, 2002, October 1, 2004, June 1, 2006, September 1, 2007, and July 1,
2009. In 2006 the IAI X congress in Jakarta stipulated that IFRS's full convergence will be
completed in 2008. The target at that time was to be fully compliant with all IFRS standards in
2008. But on the way it was not easy. Until the end of 2008 the number of IFRS adopted had
only reached 10 IFRS standards from a total of 33 standards (occurred in the period 2006-
2008).

From the revised 1994 IAI has also decided to harmonize the PSAK standard to International
Financial Reporting Standard (IFRS). Furthermore, the harmonization was changed to adoption
and finally the adoption was aimed at convergence towards the International Financial
Reporting Standard. The convergence program on IFRS was carried out by IAI by fully adopting
international standards (IFRS and IAS).

One form of revision of the IAI standard in the form of adoption of international standards
towards convergence with IFRS was carried out with the latest revision carried out in 2007. The
revision in 2007 was part of IAI's long-term plan of fully convergence with IFRS in 2012.

The scheme towards full convergence with IFRS in 2012 can be described as follows:

At the end of 2010 it is expected that all IFRS has been adopted in PSAK;

2011 is the year of preparing all supporting infrastructure for the implementation of PSAK which
has adopted all IFRS;

2012 is the year of implementation where IFRS-based SFAS must be applied by companies that
have public accountability.