i made this essay in order to fulfill application for short courses in Malaysia from Malaysian Tax Academy of Malaysia = MTA.

-29 January 2012-


Islam has represented one of the most significant manifestations of “The Other” for those in The Western world for many centuries. Modern accounting in Islamic societies must face the challenge of reconciling a desire to adopt International Financial Reporting Standards (IFRS) with a need to preserve core Islamic values. Islamic financing has been a viable alternative to western banking since the early 1970’s and complies with the major concepts of Shari law, namely that :

  • Interest (usury) should not be charged or collected
  • No form of gambling be undertaken
  • No investment should be made in a business which is deemed to be unlawful under Shari law.

Imperative need for Accounting Standards:

  • Emphasis of the Qur’an  “..never get bored with recording it, however small or large, up to its maturing date, for this is seen by Allah closer to justice, more supportive to testimony, and more resolving to doubt..” (Al-Baqara : 282)
  • An open room for making appropriate accounting judgement “..except when it is spot trade carried out amongst yourselves, then you are not to blame for not recording it..” (Al-Baqara:282)

Measurement and Revaluation :

  • Accounting measurement : the determination of the amounts at which accounting elements should be recognize-matching
  • Measurable attributes : fall into two categories; cash equivalent value and historical cost
  • Justice consideration : value of an investment account is dependent upon its expected cash equivalent value.

Issue of Revaluation :

  • Revaluation of Assets/Liabilities : measurement at cash equivalents require periodic revaluation of assets liabilities and restricted investments. Currently adopted standard : “..historical cost shall be the basis used in measuring and recording the assets at the time of acquisition thereof”.

IFRS (International Financing Reporting Standards) provides an accounting choice for subsequent measurement of fixed assets. An entity may use either the cost model or the revaluation model to value items of fixed assets for the purpose of presentation in the balance sheet. When cost model is used, items of fixed assets are valued at the acquisition cost adjusted for accumulated depreciation and accumulated impairment loss. When the revaluation model is used, item of fixed assets are valued at the fair value at the balance sheet date.

However, it is not necessary to determine the fair value at each balance sheet date. The requirement is that the amount at which the asset is valued for balance sheet presentation should not differ materially from the fair value at the balance sheet date.

In the Financial Accounting Standard Statement (PSAK) No. 16 revised edition year 2007 effective per 01 January 2008, there is a provision stating as follows “if an asset is still revaluated, all fixed assets in the same group should also be revaluated”. What are the consequences of this statement? In the commercial accounting, it is not necessary for a company to revaluate all fixed asset owned, only those included in the same group.

By contrast, the latest tax provision stipulates differently where revaluation should be carried out to all tangible fixed assets-including or excluding land with ownership right/right to use- in Indonesia, owned and used for acquiring, collecting and maintaining income as tax object.

Another crucial difference is that the period of fixed asset revaluation. Based on PMK no. 79/PMK.03/2008, fixed asset revaluation cannot be performed again until a five year period after the last revaluation elapse, whereas the latest PSAK No. 16 does not specifically regulate the matter.

The PSAK No. 16 only states that “revaluation should be made in a regular orderliness to ascertain that the amount recorded is not materially different from the amount determined under a fair value at the balance sheet date”. Further, it stipulates that “the revaluation frequency depends on the change of fair value of a fixed asset being revalued”.

If the fair value of the revalued assets is different in material amount compared to the amount recorded, subsequent revaluation should be conducted”. Its means that commercially, a company may conduct revaluation prior to the end of five year period after the last revaluation performed. The difference between the PSAK treatment and the tax regulation should be recorded in detail and continuously based on the common bookkeeping practice used in Indonesia.

Above all, the most basic thing to do is to ensure that the revaluation is performed in accordance with the prevailing tax regulation. If not, even though there is a revaluation which is commercially recorded in the financial statements, it is possible that it may not be recognized fiscally. The worst consequence is that cost efficiency as the main purpose of revaluation cannot be achieved.


“a drop of ink can move a million people to think”

“A man will never fear something besides Allah unless it be due to a disease in his heart”- Ibn Taimiyah


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