Consolidation Financial Statement Process Procedure: Case Study

at PT XXX

Muhammad Ridwan Juswandi

and Edward Tanujaya

Faculty of Economics, Universitas Indonesia, Jakarta –Indonesia

Co-Author,

Faculty of Economics, Universitas Indonesia, Jakarta –Indonesia

Keywords: Procedure, Consolidation Financial Statement, Subisidiary, Holding Company

Abstract: The The company which has the subsidiaries need a financial statement that can show their financial

performance as a whole or as one economic entity for better decision making. The purpose of this research

is to show how a company should prepare consolidation financial statement, that previously never been

made. The case study research is conducted in a firm that has 53 subsidaries, divided into 7 subholding. The

process starts with overhauling the financial statement preparation process because the companies do not

have standard for preparation financial statement, from policy making to step by step procedures. To

produce consolidated financial statement the company should have standard operating procedure for

preparing financial statement and consolidated financial statement. This standard operating procedure

should be easily to understand and can be used by everyone. It is concluded that through this process, the

consolidated financial statement could assists management in solving financial and management can take

srategic decision.

1 INTRODUCTION

Today companies need fund for develop their

bussiness. These fund can be from bank or public.

To get that companies need something to be

presented. Companies need financial statement to be

presented. Financial statement use by a single

company, if the company have subsidiaries they

must use consolidation financial statement. Financial

statement use to povide infomation on the financial

position, financial performance and cash flow,

that’s it used to decision making (Ikatan Akuntan

Indonesia, 2017). The financial statement it is to

show performance to bank or public. If the financial

statement shows a good performance, then bank or

public trus to lend their funds to the company.

PT XXX founded about fifty years ago. PT XXX

has 53 subsidaries, divided into 7 subholding. the

subsidiaries is engaged in mining, forestry,

agribusiness, service, and media. All companies not

produce financial statement uniformly both in the

presentation or timing. When financial statement has

not produce uniformly so financial statement could

not used for a decision making by management. Is

financial statement cannot be used for a decision

making so the reports is to be difficultof being

consolidation financial statement.

Company cannot produce consolidaton financial

statement without good financial statement from

subsidiaries. Good financial statement can be

produce with a good standar operational procedure.

If company has no standar operational procedure and

only counts on individual employee, the report

cannot be use to decsion making. Company must

produce consolidation financial staement if they

have subsidiaries. Consolidation financial statement

can be use for fund from bank or public and

management can notice performance from parent

company and subsidiaries.

2 THEORICAL FRAMEWORK

To make someone to able to do something new and

unusual so required a standard operational pocedure.

Standard operational procedure is a procedure to or

the phase that recorded and the need to be done to

settle a certain processes and standards that written

used to achieve a purpose organization (Kasma,

2012). Standard operational procedure divided into

1056

Juswandi, M. and Tanujaya, E.

Consolidation Financial Statement Process Procedure: Case Study at PT XXX.

DOI: 10.5220/0009503310561060

In Proceedings of the 1st Unimed International Conference on Economics Education and Social Science (UNICEES 2018), pages 1056-1060

ISBN: 978-989-758-432-9

three parts: system, procedure and step. Sytem is

activities, procedure is more detailed explanation on

activity, and step are the activities of the procedure

more detailed (Stup, 2001). Standard operational

procedure as guidance to ensure decision, effective,

consistent, standard and systematic (Tambunan,

2012).

Standard operational procedure advantages for

the an organization in order to measuring of

employee performance, as a guide and

communication and supervision and they also

aasisted an employee to know what will be they

achieved (Kasma, 2012). Standard operational

procedure relating to a quality management system

because standard operational procedure constituting

a standard so the process taht ocurs be likened to the

presence of International Organization of

Standardization (Tambunan, 2012). Standard

operational procedure have a purpose and functions

to keep the consistency and level performance

employees. Knowing clear the role and funtion of

every position, clarity of groove duty, the authority

and responsibility, protects organizaion of

malpractice and to avoid default, doubt, duplicate

and inefficiency. To be legal basis made guide and

emloyee dicipline (Kasma, 2012).

Presenting the financial statements must follow

prevalling accounting standard. Standard was not

should be used all, because standard built upon each

interest. Any entity an choose principle, basic, rules

and procedures accordance whir what is needed the

entity in making and presenting financial statement.

By choosing principle, basic, regulation and

procedure iti is expected entity can make and

presenting finacial statements appropriated for the

conditions.

Financial statments is a presentation of structured

of financial position and financial performance an

entity. Complete financial statements consisting of

(Ikatan Akuntan Indonesia, 2017):

1. Statement of financial position

2. Statement of comprehensive income

3. Statement of changes in equity

4. Statement of cash flows

5. Note to financial statements

Intercompany transaction is parties that were

considered to have special relation if one side has te

ability to control the other hand or having

significant upon the parties other in decision making

of financial and operational (Ikatan Akuntan

Indonesia, 2017). Calsified of intercomapny

transaction are:

1. The same entity under control

2. Associate company

3. Individiuals having significant entity to control

or influence.

One of the reasons was intercompany transaction is

to make cash flows more flexible (Cripe, 2016).

Intercomapny transaction can be done in four way;

intercomapny transaction – sales, intercompany

transaction – working capital, intercomapny

transaction – royalti and intercompany transaction –

services. Intercomapny transaction can also be some

problems when not in control (Volmer, 2016). The

various ways that could be done to anticipate

difficulties are likely to occur at a later date : the

standard policy, central of intercompany transaction,

master data, cash flow strategic management and use

third parties for reconciliation.

Encounter turns and developing economic

enviroment, one alternative to way to can survive

and to encounter the change of was with business

combination (Mortensen, 1994; Chi&Tang, 2007;de

Souza 2016). For mergers and acquisitions can be

divided into three categories (Moeller ,2009;

Ferrer,2016): strategic reason, financial reason and

organizational reason. Some benefits when they

commit combination business is improving

efficiency in capital, skill development,reduce

repetition in production and increase economies of

scale (Ravenschaft,1987;Ferrer,2016). Business

combinationis the union of business entity, business

combination is one of the way the company to

develop business gradually. Business combinations

can be divided into three types of (Beams, 2016):

horizontal integration, vertical integration and

conglomeration. Business combination been held by

the because some thing: cos advantage, minimize

risk, reduce delay, avoid takeover, acquisition

intagible asset and other reason.

Consolidated financial statement has objective

unite report holding company and subsidiaries, to

process of consolidating done by holding company

because it has interest in subsidiaries (Lemus, 2016).

Several criteria consolidated finacial statement

according to acounting bulletin No. 51 is:

1. Holding comapny must have voting rights and

share 50% or more at subsidiaries.

2. Holding company have control at subsidiaries.

When in the near future the company plans to

sell subsidiaries, better in consolidated financial

statement is not included subsidiaries.

4. Both holding and subsidiaries should do each

opearations.

In addition to mention the citeria should be owned

an a consolidated financial satement, there are two

provisions tht must beperformed in consolidated

finacial statement (Schroeder, 2014). First, asset and

liabilities that were owned both holding and

subsidiaries could not recognized repeated. Second,

the company could not acknowledging income of

itself.

Consolidation Financial Statement Process Procedure: Case Study at PT XXX

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3 RESEARCH METHOD

Type research used researchers is type research a

mixture, qualitative and quantitative. So as to be

visible process of consolidating wich was already

carried out and see the step of fist data can be

presented. By using type research that mix is

expected to be capable of producing deep an

explanation. Researchers conducted the collection of

qualitative data by giving the types of questions to

the source of information. Functions and the use of

qualitative research is to researched about matters

relating to subject of study background. Better

understand phenomenon that until noe not widely

known, to determine a new perspective about matter

which has been known, used by researchers who

want examining something in depth, used by

researchers willing to analyze something

background and researchers who want to use matter

that not widely kwoen science. While to add

accuracy or truth data on research, the researchers

add type the research by using type quantitative

research support creating data from the consolidated

financial statement.

Data collection method in this research was:

1. A literature review, be conducted by way of

check of literature dealing with the accounting

standard guidelines.

2. The field study , done by looking at the process

of making the consolidation of those wich have

occured and discussions with the related in the

preparation conslidated financial statement.

3. Case studies, conducted by means of implement

procedure would be made in consolidated

financial satement.

4 ANALYSIS

This research began with a restructuring company. a

result of restructuring done this is the intercompany

transaction. After seeing restructuring and see

intercomapany transaction needs to preparation of

financial statement and consolidated financial

statement.

4.1 Restructuring Company

Restructuring which is done by PT XXX and

subsidiaries wich has been done since the beginning

of 2010, that the reason were:

1. Strategic Reason

PT XXX restructure this is done to encounter

the market which keeps growing company so

going concern awake.

2. Organizational Reason

PT XXX and subsidiaries want to grouping

company to the core business from each

company that the company focus on ability to

carry out and non operational the core business.

PT XXX and subsidiaries do a combianation

business with do vertical integration and

conglomeration. Vertical integration, PT XXX and

subsidiaries have company from upstream and

downstream. Conglomeration , PT XXX and

subsidiaries perform the merger that had nothing to

do business at all. Resructuring ondusted by PT

XXX and subsidiaries had several advantages; costs

advantages, the risk that smaller, reduce delay and

avoid the firm outer force from take over. Besides

the profit gained there are several obstacle faced the

company, communication among parts and

recording the cash flows.

4.2 Intercompany Transaction

Which transactions are conducted by PT XXX and

subsidiaries done under the same control, with the

association and with individuals having significant

to the control or influence. The transaction

conducted by way of intercompany transaction –

working capital and intercompany transaction –

services. Intercompany transaction – services they

had experienced no diffcultly daily in the operation

because transaction by virtue of contract as well as

the documentaion.

Intercompany transaction – working capital who

has six combination transaction, transactions seemed

having problems inculding: no standard policy for

intercompany transaction, no central control for

intercompany transaction, no standard master data,

there is no startegy cash management for

intercompany transaction and transfer pricing

documentation issues.

4.3 Financial Statement

Some financial statement the company has a

mismatch. Some company not doing maintenance

for account recivable, inventory, retained earning,

tax, investation, deffered cost, payable, bank, and

prepaid expense. This happened in some companies

that have not audit. this mismatch make

management cannot make decision making for each

companies. If management use this financial

satement for decison making is useless.

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4.4 Consolidated Financial Statement

A person in charge of consolidated financial

statement PT XXX and subsidiaries do not have

written schedule to settle consolidated financial

statement. Consolidated financial statement PT

XXX and subsidiaries still adjusted to the needs of

subsiadiary. When the companies need to

compliment data to bank PT XXX took less than a

month to prepare the statement. The time it takes

were due to but does consolidated financial

statement PT XXX responsible for it must build

consolidated financial statement for subholding

forestry, mining private, media, services and CSR.

In addition responsible for the have to manage

financial statement some companies. ERP used by

PT XXX and subsidiaries is can accommodate

consolidated financial statement, but human

resource to turn on consolidate dfinancial statement

less both in the number of quality. PT XXX use

application spreadsheets to consolidate.

At the time of cosolidating in PT XXX, there are

several problems: maintenance chart of account,

manintenace vendor and customer, maintenance

investation, and maintenance revenue and cost. With

constrain occuring in PT XXX, the PT XXX and

subsidiaries consolidated financial statement has

been done for necessary management to see

performance has been done during a priod back and

prepare strategic plan to be taken companies in the

future.

Income is recorded in income in statement of

comprehensive incomes from the third parties:

income over loading and unloading conducted port,

income over coal transportation services, coal on the

sale of income, income on the sale of crude palm oil,

and income on the sale of logging. The gain was

contribute 99% PT XXX income. Subholding media,

services and csr still not contribute PT XXX income.

Consolidated working paper for revenue could not

give details income and a burden is intercompany

transaction. Intercompany transaction still problems.

Operating income is good enough to classify based

on customer income, but for business costs is still

difficult to classify based on vendor. A vendor

undetermined according to cause in the elimination

income and load happened the difference. The

difference thi will make a statement unbalanced, so

as to lessen the difference is that refferedto be

income is classified according customer. Thus, the

be eliminated in accordance incomes and there is no

difference.

5 RESULTS

The results of the research is PT XXX are not yet

having standard operational procedure to produce

financial statement and consolidated financial

statement. The absence of standard operational

procedure make reprts that produced is not uniform.

Do not inconsistency in this report can be seen

from: irregular intercompany transaction – working

capital, irregular chart of account, cannot determined

income and cost and some account not manage in

well. Therefore the financial statement and

consolidated financial statement cannot produce

very well.

6 CONCLUSIONS

PT XXX restructure gradually done since 2010 until

now. Restructuring is done is doing business

combinations by means of vertical integration and

conglomeration. Restructuring use vertical

integration and connglomeration can be seen by

previously only one company and now total 53

company from uptream to downstream. This process

is one way to company can survive the market.

One of the result of restructuring is intercompany

transaction. Intercompany transaction divide into

two; intercomapny transaction – services and

intercompany transaction – working capital.

intercompany transaction – working capital no in

writting hence often made a mistake in recording in

some transactions resulting in difficultly on

reconciliation. Reconciliation would be easier to

policies standard for intercompany transaction.

Every month PT XXX and subsidiaries a

Statement of financial position, Statement of

comprehensive income and Note to financial

statements. Such financial statement served in a

incomplete there were Statement of changes in

equity and Statement of cash flows. Statement of

cash flows ake by finance only income reduce by

cost per month. There is no witten caused no

inconsistency the financial statement.

How the completion os financial statement and

maintenance account in the report well to simplify

company to preparing consolidated financial

statement. But because the procedure he preparation

of reports on PT XXX there has been no, then give

impact in preparing consolidated financial satement

it should be right time and well for management.

Now consolidated financial statement PT XXX and

subsidiaries are adjusted to the needs, if companies

Consolidation Financial Statement Process Procedure: Case Study at PT XXX

1059

need a complemetary data to bank then PT XXX

took less than a month to prepare the report. In

preparing consolidated financial statement timely

and appropriate for management needed a written

sandard operational procedure. So consolidated

financial statement can be used for decision making.

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