PSAK 24: The Importance of Companies Calculating Post-Employment Benefits

The Statement of Financial Accounting Standards (PSAK) is a vital regulation in Indonesian accounting. Issued by the Financial Accounting Standards Board (DSAK), PSAK serves as the primary guide for financial accounting in the country. Under the supervision of the Indonesian Institute of Accountants (IAI), PSAK governs various financial aspects, one of which is post-employment benefits, regulated under PSAK 24. Post-employment benefits are significant in the relationship between companies and employees, reflecting a company’s long-term commitment to its workforce. These benefits focus on the financial well-being and sustainability of employees.

Post-employment benefits are long-term employee benefits provided to employees after they complete their service. These are offered when the company terminates the employment relationship. In today’s competitive business environment, understanding PSAK 24 is crucial as it forms the foundation for recognizing, measuring, and disclosing post-employment benefits. Implementing PSAK 24 helps companies maintain their competitiveness.

Following the PSAK 24 guidelines ensures that companies meet their legal obligations. It also helps maintain the trust of employees, investors, and other stakeholders. As a result, companies can uphold their reputation and public trust. Overall, PSAK 24 plays a key role in financial transparency and supports the long-term sustainability and well-being of employees.

Key Reasons to Implement PSAK 24 for Company Finances

There are at least three reasons why companies should implement PSAK 24 in their business operations.

1. Accrual Accounting Principle, is a technique where transactions are recorded when they occur. In the Financial Accounting Standards (SAK), all companies are required to record financial transactions using the accrual basis. Therefore, every company must prepare (reserve/recognize) liabilities for benefits that will be due in the future.
2. No Hidden Liabilities, if a company’s financial statements do not include an account for post-employment benefits, the company is indirectly considered to be “hiding” its liability for these benefits.
3. Company Cash Flow, when an employee retires or is terminated, and the company provides benefits, it must pay a certain amount, reducing the company’s profit for the current period. However, if the company has already reserved for post-employment benefits, the payment will reduce the reserved liability instead of directly impacting profits.

Compliance and Benefits of PSAK 24 for Companies

Companies are required to calculate post-employment benefits in accordance with PSAK 24 annually. This not only fulfills legal obligations but also aids in preparing funds for post-employment benefits. Effective management of post-employment benefits is essential in modern business, including compliance with regulations and understanding the long-term financial impact. Following PSAK 24 allows companies to identify risks and opportunities related to post-employment benefits, which is important for smart asset management and retaining top talent. Proper post-employment benefits enhance competitiveness in the market.

PSAK 24 also supports the integrity and transparency of companies. Presenting accurate post-employment benefit information in financial statements builds investor trust, which is crucial for a positive corporate image. Providing post-employment benefits in line with PSAK 24 is not just a legal obligation; it also demonstrates the company’s concern for employee welfare. Treating employees fairly reflects a responsible corporate culture.