statement of sfas no.

financial accounting standards

32
indonesian institute of accountants

accounting for forestry enterprises

this is an unofficial publication of iai ( indonesia institute of accountants),

if there is any inconsistency between indonesian and english version of
the sfas, the user of sfas should follow the indonesian version as the
official publication of the institute.
accounting for forestry enterprise sfas no. 32

statement of financial accounting standards (sfas) no. 32, accounting for forestry enterprises,
was adopted by a meeting of the indonesian accounting principles committee on august 24,
1994, and was ratified by the national council of the indonesian institute of accountants on
september 7 ,1994.

compliance with the policies contained in this statement is not obligatory in the case of
immaterial items.

jakarta, 7 september 1994

national council
the indonesian institute of accountants

indonesian accounting principles committee

hans kartikahadi chairman

jusuf halim secretary
hein g. surjaatmadja member
katjep k. abdoelkadir member
wahjudi prakarsa member
jan hoesada member
m. ashadi member
mirza mochtar member
ipg ary suta member
sobo sitorus member
timoty marnandus member
mirawati soedjono member
accounting for forestry enterprise sfas no. 32

contents

paragraph

introduction 01 - 08
characteristics of forestry enterprises 01 - 03
purposes and objectives 04 - 07
scope 08

financial statement 09 - 12
balance sheet 09 - 10
income statement 11
notes to the financial statements 12

revenue and expenses 13 - 19

revenue 13 - 14
expenses 15 - 16
operating expenses 17
cost of production termination 18 - 19

assets 20 - 23
inventory 20
timber estate in development stage 21 - 22
deferred expenditure 23

liabilities and equity 24 - 26

the development of industrial timber estate 24
forest utilisation obligations 25 - 26

transition 27

effective date 28
accounting for forestry enterprises sfas no. 32

introduction

characteristics of the forestry enterprises

01 the process of producing timber is time consuming. it begins with planting, followed by
maintenance and collection of the timber. it is dependent on the growth of stands of the logged
forest which in turn is affected by plant cycles. in the natural forests where the indonesia
selectie loging and planting (tebang pilih taman indonesia /tpti) is applied, the cutting cycle is
around 35 years. for planted forests, the cycle is determined by the class of the enterprise or
the type of tree, where the fastest economic cycle is 8 years for fast growing species.

02 forestry products include:

(1) timber logs;
(2) processed products and
(3) other forestry products.

for each activity, the products are specific and possess special characteristics. the activity
processes and types of product are usually interrelated..

03 forestry companies, such as forest concession holders (hph/hphti), have the rights and
obligations to conduct forest concessionary activities (planning, maintenance, collecion,
processing and marketing of forest products) and to manage hph/hphti areas by engaging in
activities such as planning of forest concession, organizing technical and professional human
resources to support forest concessionary activities, forest exploration, execution of forest
concession, forest preservation, monitoring and protection.

objectives

04 company financial statements indicate the success of forest utilisation programs.

05 the purpose and objective of forestry accounting is to achieve a standardized

accounting treatment as well as to ensure adequate disclosure in the presentation of financial
statements of forestry enterprises, such as forest concession holders, so that they can be used
by various external parties such as authoritative institutions and the general public.

06 by observing the characteristics and development of the forestry industry within the
framework of government regulations, as well as for interested parties to be abreast of
developments within the forestry industry, the need arises for financing information which
reflects the condition of the industry. for this purpose, an accounting standard is required to
address the accounting treatment and financial reporting for transactions that are specific to
the forestry industry.

07 financial accounting standards up to this point have been prepared for general purposes,
and have not addressed accounting practices for specific industries, including the forestry
industry. as a result, there is diversity in practices with regard to accounting treatment and
presentation of financial statements to toe point where financial statements of enterprises in
the forestry industry lack comparability to one another. to ensure uniformity and
accounting for forestry enterprises sfas no. 32

harmonization in accounting treatment and presentation of financial statements for the

forestry industry, an accounting standard for the forestry industry was required.

with the issuance of this accounting standard, all enterprises affiliated with the forestry
industry are expected to :

a) ensure uniformity in accounting practices and financial reporting for forestry enterprises
in indonesia so as to facilitate the comparability of financial statements..

b) make financial statements more informative for external parties that are not directly
affiliated with the enterprise’s business..

c) enable the government to monitor the development and financial condition of forestry
enterprises..

scope of application

08 this statement is applicable for enterprises engaging in one or more forest concession.

financial statements

balance sheet

09 assets and liabilities are presented in the balance sheet as current and non-current items.
assets are classified based on the order of liquidity, while liabilities are classified according to
maturity dates.

(ii) balance sheet components should be presented in conformity with other financial
accounting standards for accounts that are general in nature, and in conformity
with this statement for accouts specifically related to the forestry industry.
(iii)
income statement

11 the cost of goods sold should be presented separately for timber logs and processed
logs.

notes to the financial statements

12 in addition to the information that should be disclosed in the notes to the financial
statements in accordance with the financial accounting standards, forestry enterprises should
also disclose the following specific matters in the notes to financial statements.

(a) relization of activities and costs related to the reforestation program, such as the
indonesian selective logging and planting system (ptpti), forest maintenance and
protection, planting in unculivated land and other forest preservation activities.

(b) execution of forest concession

(c) details of the remaining forest areas which have not been managed during the remaining
accounting for forestry enterprises sfas no. 32

useful life of a forest concession right (hph)

(d) the remaining period of forest concession rights (hph)

(e) the classification of fixed assets and their use;

(f) timber estates (hti) should disclose the realisation of total area planted in the current
period and the total area planted to date;

(g) composition of the enterprise’s shareholders and explanation on changes of the

shareholders in the current period;

(h) details of operating revenue presented based on activities;

(i) fulfilment of obligations to the government such as reforestation fund (dr), forest
production royalty (ihh),grading and scaling fees (bpphh), forest concession rights
contribution (ihph) and other obligatory fees based on current regulations.;

(j) the change in the obligation of forestry enterprises that arises from activities such as
reforestation, the indonesian selective logging and planting system (tpti_, planting in
uncultivated land, planting alongside the main roads, forest-village development,
landscaping and other conservation efforts should be disclosed as follows::

(i) beginning balance

(ii) provision for current period
(iii) realisation for the current period
(iv) ending balance

(k) realisation of activities related to forest-village development program and its related
costs

(l) construction of facilities and infrastructure should be disclosed as follows:

(i) constructions of road and bridge building and related maintenance

(ii) types and extent of roads built in the current period
accounting for forestry enterprises sfas no. 32

(m) in relation to inventory, the followings should be disclosed:

(i) calculation basis for inventory costs

(iv) inventory should be classified as timber logs, processed logs, goods in process,
and warehouse supplies including fuel and spare parts, etc. as at the report date.
(v) inventory that is pledged as collateral and insured.

revenue and expenses

revenue

13 operating revenue includes revenue from the sales of forest products, either from
processed logs, timber logs or other products.

14 revenue should be recognised based on accrual basis.

expenses

15 expenses should be recognised based on accrual basis.

16 the cost of timber logs and other forest products includes the cost incurred in relation to
activities such as :planning, planting, maintenance and restoration of the forest, fire control
and forest protection, collection of forest products, fulfilling obligations to the government,
fulfilling environmental and social responsibilities, and construction of infrastructure. the
accounting treatment for activities related to timber and other forest products are as follows:

(a) planning
cost incurred in relation to the forest concession rights (hph) including forest concession
license fees (ihph), cost of preparing the twenty year concession plan (rkph) and the five
year concession plan (rkl), are separately capitalised as deferred expenses and amortised
over the period benefited as production costs.

costs related to preparing the annual concession plan (rkt) are included as production
costs in the current period.

(b) planting
expenses related to reforestation of natural forests are charged against production costs
of forest products. costs related to planting trees which are not intended for production,
like forest conservation, are presented as other expenses.

expenses related to forest utilisation, such as: 1) cost of replanting logging tracks; 2)
costs for planting in uncultivated area; 3) cost of planting on road sides; 4) landscaping;
and 5) costs for other conservation efforts, should be estimated and charged against
production costs even if the activities have not been performed. the estimated amount of
liability balance should be evaluated at the end of each period.
accounting for forestry enterprises sfas no. 32

for the timber estate:

(i) when trees are not ready for harvest, the costs related to planting activities are
capitalized as “timber estate (hit) in development” until the harvesting time, and
should be amortised .over the concession period. amortisation should begin from
the date of harvesting and is recorded as production cost. the amortisation should
be recorded under the straight-line or the unit of production method.

(ii) when the trees are ready for harvest, the related cost are recorded as production
cost

(c) maintenance and restoration

cost related to the maintenance and preservation of forest should be expensed as
production costs. obligations incurred in relation to maintenance and preservation of
forests, and not completed before the reporting date, should be estimated and stated as
liabilities.

for the timber estate:

(i) if there are no readily logged stand, the costs related to forest maintenance and
preservation are capitalised as the " timber estate (hti) in development " until
harvesting time and thus amortised during the concession period. amortisation
commences from the date harvesting start and it is recorded as production costs.
the amortisation methods may be straight line or unit of production.
(ii) if there are readily logged stands, costs related to maintaining and preserving such
forest are recorded as production costs.

(d) fire control and forest protection

the construction and/or procurement of fire control and forest protection equipment
includes, but is not limited to, construction of wathctowers and security posts,
construction of fire hydrants, and procurement of fire trucks. these are capitalized as
deferred charges and amortised over the maximum benefits period up to the end of the
concession period. costs related to fire control and forest protection efforts which
includes the mobilisation of manpower, usage of materials and supplies, and fire
insurance premiums are expensed as production costs.

obligations relating to fire control and forest protection, which have not been performed
as at the balance sheet date should be estimated and presented as components of
liabilities. expenses incurred are charged as production cost in the current period.

(e) collection of forest products

expenses related to forest product harvesting are charged as production costs.
accounting for forestry enterprises sfas no. 32

(f) fulfilling obligations to the government

forestry enterprises have technical and financial obligations to the government.
technical obligations include, but are not limited to, environmental impact assessment
(amdal), statement on environmental information (pel), environmental management plan
and environmental monitoring plan (rpl). financial obligations include, but are not
limited to, forest production royalty (ihh), grading and scaling fees (bpphh),
reforestation funds (dr), and the area’s land and building tax (pbb).

costs related to the preparation of amdal, rpl and rkl are capitalized as deferred charges
and amortised over the benefit period as production costs.

costs that related to fulfilling financial obligations determined by the government such
as ihh, dr, bpphh and the area’s pbb are expensed as production costs under the accrual
basis

(g) social and environmental responsibilities

environmental and social responsibilities include undertaking forest-village
development program (bina desa hutan) /development of the forest-village communities
(pmdh).

costs incurred in connection with diagnostic studies related to forest-village

development program (pmdh) are recorded. as deferred charges and amortised over the
benefit period as production costs. the costs related to undertaking forest-village
development program (pmdh) should be expensed as production costs.

(h) construction of infrastructure and facilities

building of main roads and branch roads are capitalised and amortised during the useful
life and recorded as production costs. costs for sub-ranch roads are charged as
production costs.

operating expenses

17 for the industrial timber estate, general and administrative expenses that bear no
relations to planting, maintaining and preserving of forest activities should be recorded as
general and administrative expenses.

production disruption expenses

18 expenses incurred as a result of normal or routine disruptions in production such as

those caused by seasonal/weather conditions are recorded as production costs..

19 expenses incurred as a result of other production disruptions such as caused by other

events such as fire or other natural disaster, are recorded as extraordinary items.

assets

inventory
accounting for forestry enterprises sfas no. 32

20 forest products derived from the timber collection site and timber collection area should
be recorded as inventory.

timber estate (hti) in development

21 forestry enterprises conducting several forestry activities, including timber estates,

should presented deferred expenses relating to development of timber estates separately from
other deferred expenses under a special account entitled “hti under development”. this account
is presented after current assets and before fixed assets in the balance sheet..

22 for timber estates, the interest costs on borrowings incurred are capitalised during one
cycle as ”timber estate in development” and amortised during the concession period as
production costs.

deferred expeses

23 costs incurred in relation to forestry activities that have a benefit period of greater than
one accounting period, such as the costs of obtaining the hph including the ihph, the costs of
preparing the rkph and rkl, and the costs related to environmental conservation, are recorded
as deferred expenses and are amortised based on the estimated benefit period. deferred
expenses should be presented separately in the balance sheet.

liabilities and equity

the development of industrial timber estate

24 funds received for hti projects are treated as follows:

(a) funds received as capital investment are presented as part of equity; and

(b) funds received as other than capital investment are presented as liabilities.

forestry liabilities

25 estimation of liabilities in relation to reforestation obligations, selective cutting, planting

of cleared area, road-side planting, village education and guidance, landscaping and other
conservation efforts which have not been conducted by the balance sheet date are presented as
part of other liabilities.

26 if the amount of the above-mentioned liabilities is not known, such liabilities have to be
reasonably estimated. by the end of each period, estimation of liabilities needs to be evaluated
and if necessary, adjusted.
accounting for forestry enterprises sfas no. 32

transition period

27 the accounting treatments explained in this standard should be applied prospectively.

when in applying this statement for the first time, an adjustment relating to forestry
obligations is required, the resulting costs can be deferred and amortised over the remaining
hph period.

effective date

28 this statement becomes effective for financial statements covering periods beginning on
or after january 1, 1995. earlier application is highly recommended.
accounting for forestry enterprises sfas no. 32

glossary

annual concession plan (rencana karya tahunan pengusahaan hutan)

is an annual plan that elaborates, revises and improves the five year concession plan.

construction of facilities and infrastructure

construction of facilities and infrastructure includes, but is not limited to, construction of base
camps, main roads, branch roads and sub-branch roads. the roads from a hierarchy that
consists of 3 levels : main roads, branch roads and sub-branch roads. a main road should exist
before its branches do, a branch should exist before sub-branch do. the costs of constructing
main roads and branch roads are capitalised and depreciated over their useful life of
production cost, while thouse for constructing sub-branch roads are charged as production
cost.

environmental impact assessment (amdal)

is a study of the impact of planned activities on the environment.evaluation

study on the environmental impact (studi evaluasi mengenai dampak lingkungan or semdal)
is a study conducted to evaluate the impact of an activity on the environment, the result of
which is required for decision making.

five year concession plan (rencana karya lima tahun pengusahaan hutan or rklph)
is a plan prepared every five years to elaborate, revise and improve the twenty year
concession plan.

forest concession holder (pemegang hph)

is a legal entity that has been granted forest concession rights by the minister of forestry

forest concession rights (hak pengusahaan hutan or hph)

is a privilege granted to an enterprise to perform forestry activities that consists of logging,
forest regeneration and maintenance, processing and marketing of forest products in
accordance with the twenty year concession plan based on prevailing regulations and
upholding the principles of forest preservation and sound enterprise practices.

forest
is an area within which trees and plants grow and form a living community with its
environment. a forest legally exists when it is decreed so by the government

forest planning
is a plan that outlines the purpose, preparation, utilisation and preservation of a forest. it also
includes the pattern of activities in a forest concession, in time and space dimensions.

forest product royalty (iuran hasil hutan or ihh)

a fee charged to the forest concession holders to compensate for part of the intrinsic values of
harvested forest products.

forest protection measures

taken to prevent damage to the forest caused by erosion, fires, thefts, illegal concession
accounting for forestry enterprises sfas no. 32

activities, pests and diseases, and to preserve the plant and animal lives.

forestry agreement (sk hph)

a license granted by the minister of agriculture that also elaborates legal requirements that
have to be met in performing a forest concession or an area that constitutes part of the
concession.

fulfilment of environmental and social responsibilities

fulfilment of environmental and social responsibilities includes forest village development
program /pmdh. cost related to diagnostic study on forest village development program/pmdh
are recorded as deferred charges and amortised over their useful life as production cost. costs
related to forest village development program/pmdh are charged as production cost.

grading and scaling fee (bpphh)

is expenditure allocated for activities that support optimal utilisation of forest products. such
activities involve, among others, determination of the types, and measurement of the volumes,
weight and quality of forest products.

indonesian selective logging and planting system (tpti)

is a silvacultural system that involves, among others, cutting trees with certain diameters and
forest regeneration.

inventory
inventory includes, but is not limited to, timber logs, processed logs, work in process, spare
parts, supplies and tools round logs are usually kept in three types of location, timber
collection site (tpn), log pond/transitory log pond/log yard, and industrial log pond. forest
products that have reached tpn and log pond/log yard should be recorded as inventory.

license fee
(iuran hak pengusahaan hutan or ihph) a fee charged to the forest concession holders for their
forest utilisation right which are valid for certain forest areas assigned to the concession
holders. the fees are charged only once, that is when the rights are granted by the authority.

log pond for primary woods industry

is a place that receives, stores and distributes round logs and/or chips materials, in accordance
with the decree of the forestry minister no. 402/kpts-iv/90)

primary wood industry (industri pengolahan kayu hulu or ipkh)

is and industry in which the main activity is processing round logs and/or wood chips

production disruption expenses

in forest concessions, disruptions of production are commonly found. disruptions can happen
due to : seasonal and weather conditions.
certain seasonal and weather condition prevent an enterprise from collecting forest products.
however, some production costs may have been incurred. costs incurred due to seasonal and
weather conditions are recorded as production costs. other disruption costs that arose due to
natural disaster or fire are presented as extraordinary items.

reforestation funds (dana reboisasi)

are funds collected from the forest concession holders, forest product collection right and
accounting for forestry enterprises sfas no. 32

wood utilisation permit, for the purposes of reforestation and development of timber estates
and forest land rehabilitation.

silviculture
techniques applied in forestry activities, in performing maintenance of the forest and in
manipulating the growth and composition of the forest.

statement on environmental information (penyajian informasi lingkungan/pil)

is a study that outlines the plan of activities, environmental condition at the sites of the
activities, possible environmental impacts due to those activities and a plan to control its
negative impact.

timber collection site (tempat pengumpulan kayu/ tpn)

a type of forest developed to enhance the quality of production forest through application of
intensive silviculture to meet the demand for materials in the forest product industry.

timber estate concession rights (surat keputusan hak pengusahaan tanaman industri or sk
hphti)
a license granted by the minister of agriculture that also elaborates legal requirements that
have to be met by a state-owned enterprise, a private entity, or a cooperative in performing a
timber estate concession.

transitory log pond

a place to keep water

twenty year concession plan (rencana karya pengusahaan hutan or rkph)

is a plan that provides guidelines, including the enterprise’s philosophy, required by the
enterprise to meet the stated objectives and goals and equipped with data, analysis and
projections and a plan of activities such as gazetting, harvesting, planting, assessing the
forest, preserving the forest, and developing local communities. the rkph plan is used for
formulating shorter-term plan.