Sudiro Asno, director of finance, Telkom Indonesia
Photographer: Margaret Marescotti
Sudiro Asno, Director of finance, Telkom Indonesia

Telkom Indonesia faced a tough challenge: To fully adopt International Financial Reporting Standards (IFRS) by the end of 2011, one year earlier than required by the U.S. Securities and Exchange Commission (SEC).

Because Telkom Indonesia is listed on both the New York and Indonesia stock exchanges, the company must file its financial statements in both countries. This means adopting the new IFRS — approved by the United States for foreign filers — to replace the current U.S. GAAP (generally accepted accounting principles) while continuing to use the company's existing Indonesian accounting standards, known as "PSAK" or Indonesian GAAP.

For the last two years, Telkom Indonesia has been working diligently toward the IFRS implementation. "Our objectives for early implementation are in line with the company's vision," explains Sudiro Asno, director of finance at Telkom Indonesia. "We want to be one step ahead of other companies and lead the way as the first state-owned enterprise to adopt the IFRS in Indonesia. Additionally, since the IFRS are globally accepted, the implementation will improve our investors' confidence and understanding regarding our financial reporting. And this will lead to an increase in Telkom's corporate value."

Due to the complexities of the implementation, Telkom Indonesia turned to Towers Watson for help. "We have worked with Towers Watson for more than 15 years on our actuarial valuations and on pension and benefit plans," says Asno. "Because of this long-standing relationship — as well as Towers Watson's impressive understanding of accounting practices — we considered their expertise and experience critical to our success."

The first two phases — assessment and design — entailed the creation of an IFRS implementation task force, a complete review of IFRS requirements and implementation guidelines, information technology (IT) system development and a trial run of the system. These phases were successfully completed in 2010.

Implementation came next. "Telkom is currently working through this phase," says Gde Sarmaja, Towers Watson senior consultant and actuary. "This consists of putting into practice the initial preparations from the first two phases, such as accounting and reporting, data and technology, process and controls, and change management."

Included in this stage: identifying accounting differences between local GAAP and IFRS along with information gaps for conversion; developing communication plans for all stakeholders to address the impact of conversion on creditors, customers and suppliers; creating IT transition plans to prepare for data transfer; and developing and executing training plans for employees across functions and locations.

Towers Watson and Telkom Indoensia — Gde Sarmaja, Sudiro Asno, Lilis Halim
Left to right: Gde Sarmaja, Towers Watson senior consultant and actuary, Sudiro Asno, Telkom Indonesia's director of finance, and Lilis Halim, Towers Watson managing consultant.

"As part of the implementation, Towers Watson is assisting us by providing employee benefit actuarial calculations, using the IAS 19 concept," says Asno. "Due to their experience, they have a deep comprehension of the International Accounting Standards Board's requirements of IAS 19, the accounting practices for pensions and other post-employment benefits."

IAS 19 — a crucial aspect of IFRS — ensures that investors and other users of financial statements are aware of the financial risks associated with these commitments, in particular by requiring the surplus or deficit of a pension fund to be reflected in the financial statements.

The final phase of Telkom Indonesia's transformation, sustain, will be carried out in 2012. "At that point, Telkom Indonesia will conduct a final implementation of IFRS as well as a complete evaluation of the system," says Lilis Halim, Towers Watson managing consultant.

Overcoming challenges

As in most transformation processes, Telkom Indonesia has faced numerous internal and external obstacles. "Internally, implementing IFRS is more than just an accounting exercise because it affects many different functions and divisions across the company," says Asno. "Therefore, it's essential to create a comprehensive plan before beginning in order to harmonize with other initiatives and projects."

He adds, "This plan minimizes the disruption of daily business and operations while managing stakeholder expectations and securing organizational buy-in from company-wide resources through budgeting and planning, investor relations and public communications." At the same time, a major external challenge is the need to provide two different sets of financial statements: the IFRS filing, which is accepted by the U.S. SEC, and the Indonesian GAAP, required by the Indonesian SEC. While the differences in the financial statements are minor in scope, the company must still work to produce both.

To manage this challenge, Telkom Indonesia is relying heavily on information technology to develop a system for maintaining multiple ledgers. The new multiledger functionality will support different ledgers simultaneously in one system and is capable of performing separate transactions related to different ledgers.

Towers Watson working with Telkom Indonesia — Gde Sarmja and Djusnimar
Left to right: Djusnimar Zultilisna, senior manager, HR budget, Telkom Indonesia with Towers Watson's Gde Sarmaja

The road ahead

Despite the immense hurdles involved in the implementation, Telkom Indonesia gains numerous benefits by using IFRS. "This system streamlines our financial reporting and creates common reporting processes and systems to achieve consistency in statutory reporting," says Asno.

Additionally, in the long run, the change potentially reduces long-term reporting costs and creates cost savings through centralized training and development. IFRS will also promote the comparability of Telkom's financial figures with those of international peers, and create greater access to foreign capital markets and investments.

Adds Asno, "We are fortunate to have Towers Watson helping us in this huge endeavor. With their guidance, our transformation to IFRS will not only represent a fundamental change to accounting and financial reporting but also will have far-reaching implications for key areas of the business."


The growing acceptance of the IFRS began several decades ago as an effort by industrialized nations to create accounting standards that could be used by developing and smaller nations.

But as the business world became more global, accounting leaders from around the world began to realize the importance of establishing common standards in all areas of the financial reporting chain. They agreed that a single set of international standards was essential for economic growth.

In 2001, the International Accounting Standards Board was founded. This committee is responsible for developing the IFRS and promoting their use and application. Currently, the IFRS are used in more than 100 countries, including China, Hong Kong, Russia and most European countries under the jurisdiction of the European Union. The following countries are currently preparing for IFRS transformation: India (2011), South Korea (2011), Thailand (2011), Malaysia (2012), Taiwan (2012), Japan (2015) and the United States (2016).