Will PSAK 118 Make Indonesian Companies Disclose Less?

The number on slide seven meets PSAK 118

Somewhere in Jakarta there is a results presentation with “Adjusted EBITDA” on slide seven. It has been there for years. It strips out a handful of things (a restructuring charge, a goodwill impairment, the foreign-exchange swing on a dollar loan) and arrives at a number management believes describes the business better than the statutory profit line does. Analysts model on it. It appears in the press release, the deck, and the call script. Nobody audits it, because nobody has had to.

From 1 January 2027, somebody does.

PSAK 118 — Indonesia’s adoption of IFRS 18, endorsed by DSAK IAI in May 2025 — changes how financial statements are presented rather than how profit is measured. It standardises the income statement, mandates a few subtotals everyone has to show in the same place, and tidies up where information sits. Most of it is plumbing. The part that matters for this article is a new category with an unlovely name: Ukuran Kinerja Tetapan Manajemen, or management-defined performance measures (MPMs).

The rule is simple to state. If you use an adjusted number in public communication, and it is a subtotal of income and expenses that reflects management’s view of performance, you now have to put it in a note inside the financial statements. Define it. Explain why it is useful. Reconcile it to the nearest statutory subtotal. Show the tax and minority-interest effect of every adjusting item. And that note sits inside the audited accounts, which is the part that changes the texture of the whole exercise. Your adjusted number is about to get audited.

So here is the question worth asking, and the one put to me directly: does forcing companies to audit and reconcile their adjusted numbers produce more disclosure, or less?

The intuitive answer is more. You are being made to show your working, and showing your working is disclosure. The interesting answer, the one with evidence behind it, is: fewer numbers first, and then it depends entirely on who is in the room.

We have run this experiment before

The United States did exactly this, twenty-odd years ago. Before 2003, American companies published “pro forma” earnings (their own adjusted figures) with enormous enthusiasm and very little discipline. Some of it was genuinely useful. A lot of it was the art of removing whichever costs had spoiled the quarter. After the dot-com wreckage, the SEC decided that if you published an adjusted number you had to reconcile it to the statutory one, through a rule called Regulation G and a matching provision in Sarbanes-Oxley.

The immediate effect was that companies published fewer adjusted numbers. The share of S&P 500 firms reporting pro forma earnings fell from 77 percent to 54 percent in two years. On the face of it, that is the thesis confirmed: put the adjusted figures under a brighter light and you get fewer of them. Less disclosure.

The rule did not so much reduce information as launder it.

Except look at the second number from the same period. The proportion of those presentations that researchers judged potentially misleading fell from around 14 percent to under 1 percent. Read the two together and you can see what actually happened. The measures that vanished were disproportionately the bad ones. The companies that stopped reporting adjusted figures were, on the evidence, the ones whose adjustments had been the most aggressive to begin with. Call it a cleanse rather than a chill.

And then the number came back. Non-GAAP reporting in the S&P 500 is now close to universal, around 96 to 97 percent, and more intensive than it was before the rule existed, with several adjusted measures per filing rather than one. The contraction lasted a few years. What ended it was demand: analysts built the adjusted figures into their models, institutions wanted them, and companies that had gone quiet started talking again because their investors kept asking. Reconciliation did not kill non-GAAP reporting. It professionalised it.

If the story ended there, the answer would be reassuring. Oversight trims the count, lifts the average quality, and the genuinely useful measures survive in more credible form. This is roughly what the IASB expects, too. Its own analysis frames the MPM rules as bringing discipline to measures companies already use, not banning them, and it openly anticipates that some firms will drop bespoke measures simply because the new standardised “operating profit” subtotal makes them redundant. Fewer numbers, the standard-setter says, but not less information.

Why I would not copy the American answer onto Jakarta

Here is where I would slow down before pasting the US result onto the Indonesian market, because the mechanism that reversed the American contraction is the one Indonesia has least of.

Non-GAAP came back in the United States because demand pulled it back. That demand came from a deep bench of sell-side analysts, a large institutional buy-side, and a litigation environment that made both the company and its auditors take the numbers seriously. Indonesia’s version of each of those is thinner. Free float on the IDX has historically been low: a 7.5 percent minimum, with plenty of issuers sitting above 90 percent controlling ownership. The exchange is only now raising the floor toward 12.5 to 15 percent in phases. Ownership is concentrated in founding families and holding structures. Analyst coverage is lighter and more concentrated in the large caps. And enforcement runs through OJK as an administrative, disclosure-timeliness regime, not through the American machinery of private securities litigation.

Put those together and the asymmetry is the whole story. PSAK 118 raises the cost of every adjusted measure: audit, reconciliation, the tax-and-minority arithmetic on each adjusting item, documentation an auditor will actually test. It does nothing to raise the demand that would justify paying that cost. In the United States, cost went up and demand was already high, so companies paid it. In Indonesia, cost goes up against a demand side that was never that loud to begin with. A cleanse that corrected itself within a few years in New York can sit unreversed for much longer in a market where fewer people are pulling the other way.

There is a quiet mechanism inside the rule that makes this easier to do. PSAK 118 does not make you reconcile a number you never mention. The disclosure obligation attaches to measures you actually use in public communication. So the cheapest way to avoid the audit, the reconciliation, and the arithmetic is not to argue with any of it. It is to stop using the number. Take “Adjusted EBITDA” off slide seven, leave it out of the release, and the obligation never arrives. The standard is meant to discipline the measure. The path of least resistance is to retire it.

What PSAK 118 means if you run IR

For an IRO or a finance director, the practical reading is straightforward, and it is not “panic.” The measures that survive PSAK 118 will be cleaner, reconciled, and harder for a sceptic to wave away — that is a real gain, and the credible companies should welcome it. The risk is narrower and more specific. It is that a measure which genuinely explains your business, the one that bridges statutory profit to the economics an investor actually cares about, quietly falls off the deck before 2027 because reconciling it through audit looked like more trouble than it was worth.

The thing to watch is the easy exit. In a market that already undersupplies a good investment narrative, the cost of this transition is not a misstatement or a fine. It is silence: a slightly thinner equity story, told with one fewer number, because explaining the number became a chore and nobody on the call was loud enough to insist. Less disclosure, in Indonesia, is unlikely to arrive as a decision. It will arrive as a slide that simply stops getting updated.