Fixed Asset Revaluation: Impact on Taxable Income
Jeremia Pradnya and Handiani Suciati
Universitas Padjadjaran, Bandung, Jawa Barat, Indonesia
Keywords: Fixed asset, revaluation, disclosure, compliance.
Abstract: The economic downturn at the end of 2015, made Indonesian Government issued economic policy
regarding fixed asset revaluation, in order to boost economic condition. This policy believe could improve
company’s financial performance. The purpose of this study is to evaluate the impact of fixes asset
revaluation on the taxable income and the fixed asset disclosure compliance. This research use descriptive
method, with survey approach. Listed companies at Indonesia Stock exchange are used as the subject of this
study. We are using purposive sampling method in selecting the sample. This study is using multiple linier
regression analysis to analyze the data. We concluded that the fixed asset revaluation did increase the
taxable income. As for fixed asset disclosure compliance, we found that 2 out of 16 disclosure criterions still
need to be improved, in order to provide more complete information for the financial statement users.
1 INTRODUCTION
In the mid of 2015, the Indonesia’s economic
growth had been slower, so it was only reached 4.67
%. It was the lowest growth ever for the past six
years. This unfovaroble condition, made Indonesian
Government took a strategic movement, by
launching another stimulus to boost economic
growth. One of the stimulus, was the new tax
incentives on revaluation of fixed assets.
Previously many companies reporting their fixed
assets under historical cost, which pretty much, far
below current market price. It because the asset is
being reported undervalued, as it was acquired
several years ago. At that time, company choose to
report the asset using historical cost in order to avoid
the tax being imposed on fixed asset growth,
amounted 10 % from the capital gain.
This new tax incentives, is very interesting and
provide benefit not only for the company itself but
also for the government. At that time, the income tax
realization was much less than the targeted one. It
will provide opportunity for government to obtain
additional income tax, so government programs to
provide and support public welfare could be
executed
Under this policy, the government waive 70 % of
tax rate on the fixed asset growth, should the
company interested in this policy and submit their
proposal for fixed asset revaluation before the end of
2015. They only need to pay 3 % from the fixed
asset increasing amount. Having their asset reported
under current market value will resulted in an
increase on company’s equity. This will affect
companies’s financial performance, as the increased
equity will improve company’s leverage, it will
easier for company to obtain source of fund. All of
these benefit, will be reflected in company’s
financial statement
The financial statement preparation of entity
with public accountability, the listed and state
owned companies in Indonesia should be based on
Indonesian Statement of Financial Accounting
Standard (Pernyataan Standar Akuntansi Keuangan
or PSAK) and related regulation. It also regulate the
requirement for financial statement disclosure
aspect. Therefor it is also important, to evaluate the
company’s financial statement compliance, which is
in this study limited to disclosure compliance.
It has been known that one of country’s
economic instrument is tax, as a source of income
that support country development programs, for
providing a better public service and welfare.
Moreover tax could be use to cover budget deficit
and to distribute income among society, which is the
world economic problem nowaday (Dwi
Sulastyawati, 2014: 125).
Debate on tax incentives point of view is still
exist. It may consider as inequitable as they provide
preferential treatment for particular sector or party.
Tax incentives undermine fairness sense, because a
heavier tax burden must be placed on other sectors
340
Pradnya, J. and Suciati, H.
Fixed Asset Revaluation: Impact on Taxable Income.
In Proceedings of the 2nd International Conference on Economic Education and Entrepreneurship (ICEEE 2017), pages 340-345
ISBN: 978-989-758-308-7
Copyright © 2017 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

to raise a given tax revenue (Dale Chua, in Sutrisno
et al, 2011: 2)
At one level, tax incentives are easy to identify.
They are those special provisions that allow for
exclusions, credits, preferential tax rates, or deferral
of tax liability. Tax incentives can take many forms:
tax holidays for a limited duration, current
deductibility for certain types of expenditures, or
reduced import tariffs or customs duties. At another
level, it can be difficult to distinguish between
provisions considered part of the general tax
structure and those that provide special treatment.
This distinction will become more important when
countries become limited in their ability to adopt
targeted tax incentives. For example, a country can
provide a 10 % corporate tax rate for income from
manufacturing. This low tax rate can be considered
an attractive feature of the general tax structure as it
applies to all taxpayers (domestic and foreign) or it
can be seen as a special tax incentive (restricted to
manufacturing) in the context of the entire tax
system (Zolt & Schill, 2015:5)
In Oct 2015 Indonesian Government launched
economic policy by reducing a tax rate, as a tax
incentives on fixed asset revaluation, as stipulated in
Minister of Finance Regulation number
191/PMK.10/2015. PSAK No.16 stated that fixed
assets are tangible assets, owned to be used in the
production process or in providing goods or service
to be rented to other parties, or for administrative
purposes and is expected will provide benefit more
than one accounting period. (SAK IAI, PSAK 16,
2015).
The valuation of fixed assets could be based on
its historical cost or Fair value (SAK IAI, PSAK 16,
2015). In commercial practices, the implemantation
of valuing fixed asset based on its fair value, should
be done according to the tax regulation authorised
by Republik Indonesia Minister of Finance.
The revaluation of fixed asset is the adjustment
of company’s fixed assets value which had been
used for generating income, as the value is no longer
reflected the fair or market value. The purpose of
asset revalution is enabling company to calculate its
income and expense more fairly, so it will reflect
company’s real value. The revaluation of fixed asset
will ensure that the asset value on financial
statement will reflect the real fair value and also will
increase company’s overall value (Kusmahargyo,
2015).
The preparation of company’s financial
statement, including its diclosure, must be made
based on PSAK and related regulation. Disclosure
became an important issue under IFRS and also
other accounting standard based on IFRS, including
PSAK. The more disclosure made to investor, the
more effective capital market. By providing
mandatory disclosure, enabling company to list its
share in the capital market, to increase its reputation
and to minimize its cost of capital which will
increase company’s value (Meek, et al in Andian,
2016).
Study on the impact of Asset Revaluation on
Financial Performance, conducted by Andian (2016)
shown that asset revaluation has significant and
negative impact on debt to asset ratio. Study by Zolt
& Michael (2015) on tax incentives shown that tax
incentives can play a useful role in encouraging,
specifically both domestic and foreign investment.
How useful they can be, and at what cost, depends
on how well the tax incentive programmes are
designed, implemented and monitored. Study on
disclosure, revealed that the average mandatory
disclosure level by manufacturing company in the
first year of full adoption IFRS in Indonesia, is only
63% from all mandatory disclosures required by
BapepamLK (Andian, 2016).
2 METHODS
This research aims to evaluate whether the asset
revaluation has a significant impact on the
company’s taxable income and to analyze the fixed
assets disclosure compliance based on PSAK 16.
We used both statistical and non-statistical
analysis on this research. The statistical analysis use
to study the asset revaluation impact on the taxable
income, which involves variables:
 Fixed assets revaluation (as independent
variable)
 The changes in company’s taxable income (as
dependent variable)
The measurement of each variable, is provided in
table 1.
Table 1: The operational variable and measurement
Variable
Indicator
Measurement
Scale
Fixed
asset
revaluati
on (X)
The
increasing of
revaluation
surplus
compare with
the original
book value
Rev
t
Asset
(t-1)
Ratio
Fixed Asset Revaluation: Impact on Taxable Income
341

Table 1. Cont.
The
taxable
income
after
revaluati
on (Y)
Taxable
income under
fixed asset
revaluation
minus
previous year
taxable
income (∆TI
t
)
TI
(t)
– TI
(t-1)
TI
(t-1)
ratio
To analyze the fixed asset disclosure compliance,
we use non statistical analysis research, which will
analyze and compare the required disclosure level
with the existing ones. The required diclosure item
based on PSAK 16 are provided in table 2.
Table 2: Fixed asset disclosure checklist
Number
Disclosure Item
1
Measurement base for determining the carrying
amount (gross)
2
Depreciation method employed
3
Useful life or depreciation rate
4
Gross carrying amount and accumulated
depreciation, at the beginning and ending of period
5
Reconciliation of fixed asset carrying amount
addition, at at the beginning and ending of period
6
Reconciliation of the carrying amount of asset held
to be sold, at the beginning and ending of period
7
Reconciliation of the acquisition amount from
business combination, at the beginning and ending
of period
8
Reconciliation of any increase or decrease on
carrying amount, due to revaluation at the
beginning and ending of period
9
Reconciliation of impairment loss on income
statement
10
Reconciliation of any reversal of impairment loss
on income statement
11
Reconciliation of the accumulated depreciation, at
the beginning and ending of period
12
Reconciliation of gain or loss on exchange rate due
to financial statement translation, at the beginning
and ending of period
13
The description and amount of restricted fixed
asset and property as debt collateral
14
The amount of expenditure capitalised as asset
under cosntruction
15
The amount of contactual commitment to acquire
fixed assets
16
The compansation amount from thir party for any
impaired, lost or disposed fixed asset
Researcher conducted analysis, by made
disclosure checklist, enlisted 16 items of fixed assets
that have to be disclosed, as stated in table 2. The
checklist indicate whether the indicators fixed asset
item disclosed or not disclosed. Researcher will give
1 if the items is disclosed, give 0 if items is not
disclosed and give blank if the disclosure item is not
applicable for certain company. Researcher will then
calculate disclosure score, by adding all of
disclosure checklist items.
Research population is all companies listed in
Indonesian Stock Exchange in 2015, with total 534
companies, which then reduced by 88 companies
which did not publish financial statement in 2015,
47 companies which made fixed asset revalution
based on accounting, and 367 companies which did
not participate in fixed asset revaluation for tax
puposes until the end of 2015. At the end, we used
31 companies as research sample.
Hypotheses being tested in this study are:
Ho
1 :
β
1
≤ 0 “ fixed asset revaluation does not
positively influence the taxable
income under revaluation”
Ha
1 :
β
1
> 0 " fixed asset revaluation positively
influence the taxable income under
revaluation”
Ho
2 :
X1 = Y1 “the company which had
revaluation in 2015 does not
disclose items as required by
PSAK”
Ha
2
: XI ≠ Y1 “the company which had
revaluation in 2015 disclose items
as required by PSAK”
This research is using simple linear regression
analysis:
∆TI
t-1(i)
= a + REV
t(i)
+ ε
t
where as :
∆TI
t-1(i)
= change in taxable income (t-1)
REV
t(i)
= the revaluation surplus of fixed asset
ε = Other variable, not being studied in
this research
a = Konstanta, Koefisien Regresi
3 RESULTS AND DISCUSSION
Based on the test, we found that the data has a
normal distribution and passed the heteroscedasticity
test.
Table 3: Simple linear regression
Unstandardized
Coefficients
Standar
dized
Coeffic
ients
t
Sig
Model
B
Std.
Error
Beta
1 (Constant)
-4.965
1.617
-3.070
0.005
Rev
0.197
0.063
0.504
3.142
0.004
a. dependent variable: TI
ICEEE 2017 - 2nd International Conference on Economic Education and Entrepreneurship
342

From table 3, we found equation:
Y = -4,965 + 0,197X
Which implies:
 Constanta = -4.965. Shown that when asset
revaluation amount is zero, the taxable income
value is -4,965.
 The coefficient regression of taxable income
(X) is 0.197, which shown the increase in fixed
asset revaluation surplus will increase the
taxable income amounted 0.197 %.
Based on calculation, we found that the
coefficient determination (R
2
) is 25,4 %, which
means that the fixed asset revaluation has 25,4 %
contribution on the taxable income and the rest 74,6
% is contribution from other variable, which not
being analyzed in this research, such as the sales
increased.
Table 4: Hypothesis test
Unstandardized
Coefficients
Std
Coefficients
t
Sig
Model
B
Std.
Error
Beta
1 (Constant)
-4.965
1.617
-3.070
0.005
Rev
0.197
0.063
0.504
3.142
0.004
a. dependent variable: TI
From table 4, we can see that t-
count
is 3.142
which will be compared with the t
table
amounted ±
2.045 form the t distribution table, with α = 0.05, df
= n-k-1 = 31 -1-1 =29, for two tail test. We found
that t
count
3.142 is outside the t
table
(-2.045 and 2.045),
so we reject H
0
which mean the fixed asset
revaluation influence significantly the taxable
income of companies conducted revaluation in 2015.
For evaluating the fixed assets disclosure
compliance, researcher performed diclosure
checklist analysis on each of 16 dislosure item,
required by PSAK 16, as follow :
a. Measurement base for determining the carrying
amount (gross)
 Disclosure score = 31
 Maximum score = 31
 Disclosure compliance score = 31/31 x 100%
= 100%
 Interval range = (maximum score – minimum
score) : 5 = (100 % - 0 %) : 5 = 20%
Not
Comply
Less
Comply
Comply
Quite
Comply
Fully
Comply
0% 20% 40% 60% 80% 100%
Figure 1: Continuum line compliance level measurement
base
Disclosure compliance level for this item is
excellent (100%), as all of companies has already
implemented it
b. Depreciation method employed
 Disclosure score = 30
 Maximum score = 31
 Disclosure compliance score = 30/31 x 100%
= 97%
Disclosure compliance level for this item is
almost excellent (97%).
c. Useful Life or depreciation rate
 Disclosure score = 30
 Maximum score = 31
 Disclosure compliance score = 30/31 x 100%
= 97%
Disclosure compliance level for this item is
almost excellent (97%).
d. Gross carrying amount and accumulated
depreciation, at the beginning and ending of
period
 Disclosure score = 31
 Maximum score = 31
 Disclosure compliance score = 31/31 x 100%
= 100%
Disclosure compliance level for this item is
excellent (100%).
e. Reconciliation of fixed asset carrying amount
addition, at at the beginning and ending of
period)
 Disclosure score = 30
 Maximum score = 31
 Disclosure compliance score = 31/31 x 100%
= 97%
Disclosure compliance level for this item is
almost excellent (97%).
f. Reconciliation of the carrying amount of asset
held to be sold, at the beginning and ending of
period
 Disclosure score = 13
 Maximum score = 17
 Disclosure compliance score = 13/17 x 100%
= 76%
Disclosure compliance level for this item is quite
comply (76%).
g. Reconciliation of the acquisition amount from
business combination, at the beginning and
ending of period
 Disclosure score = 18
 Maximum score = 22
 Disclosure compliance score = 18/22 x 100%
= 82%
Disclosure compliance level for this item is
almost comply (82%).
Fixed Asset Revaluation: Impact on Taxable Income
343

h. Reconciliation of any increase or decrease on
carrying amount, due to revaluation at the
beginning and ending of period
 Disclosure score = 21
 Maximum score = 31
 Disclosure compliance score = 21/31 x 100%
= 68%
i. Reconciliation of impairment loss on income
statement
 Disclosure score = 15
 Maximum score = 21
 Disclosure compliance score = 15/21 x 100%
= 71%
j. Reconciliation of any reversal of impairment loss
on income statement
 Disclosure score = 6
 Maximum score = 6
 Disclosure compliance score = 6/6 x 100% =
100%
Disclosure compliance level for this item is
excellent (100%).
k. Reconciliation of the accumulated depreciation,
at the beginning and ending of period
 Disclosure score = 30
 Maximum score = 31
 Disclosure compliance score = 30/31 x 100%
= 97%
l. Reconciliation of gain or loss on exchange rate
due to financial statement translation, at the
beginning and ending of period
 Disclosure score = 23
 Maximum score = 28
 Disclosure compliance score = 23/28 x 100%
= 82%
m. The description and amount of restricted fixed
asset and property as debt collateral
 Disclosure score = 14
 Maximum score = 26
 Disclosure compliance score = 14/26 x 100%
= 54%
Disclosure compliance level for this item is not
good which is only 54%.
n. The amount of expenditure capitalised as asset
under cosntruction
 Disclosure score = 20
 Maximum score = 23
 Disclosure compliance score = 20/23 x 100%
= 87%
o. The amount of contactual commitment to acquire
fixed assets
 Disclosure score = 10
 Maximum score = 18
 Disclosure compliance score = 10/18 x 100%
= 56%
Disclosure compliance level for this item is not
good as it only 56%.
p. The compensation amount from third party for
any impaired, lost or disposed fixed asset
 Disclosure score = 2
 Maximum score = 3
 Disclosure compliance score = 2/3 x 100% =
67%
Disclosure compliance level for this item is not
too good, as its only 67%.
4 CONCLUSIONS
The researcher find the evidence that fixed asset
revaluation has a significant influence on the
company taxable income, with 24.5 % contributions.
Therefor by taking this tax policy intensive,
company will not only give benefit to the
government, but it will also give benefit for the
company as it will increase company’s equity.
In overall, the compliance disclosure level has
already in a very good or excelent condition, this
study revealed certain fixed assetd disclosure item,
which still need to be improved. Dislosure item
related with reconciliation of the carrying amount of
asset held to be sold, dislosure item related with
reconciliation of any increase or decrease on
carrying amount due to revaluation, dislosure item
related with reconciliation of impairment loss
dislosure item related with description and amount
of restricted fixed asset and property as debt
collateral, dislosure item related with the amount of
contactual commitment to acquire fixed asset,
dislosure item related with compensation amount
from third party for any impaired, lost or disposed
fixed asset.
REFERENCES
Andian, I., 2016. Karakteristik Perusahaan Sebagai
Anteseden Pengungkapan Wajib Informasi Akuntansi.
Jurnal Economia, Volume 12, Nomor 1.
http://www.idx.co.id/beranda/perusahaantercatat/laporan
keuangan dan tahunan.aspx, 26 Juli 2016
Ikatan Akuntan Indonesia, 2015, Standar Akuntansi
Keuangan per 1 Januari 2015, Jakarta, Ikatan Akuntan
Indonesia
Kusmahargyo, H., (2015). Metrotvnews.com. ac-cessed on
30/01/2016
Menteri Keuangan Republik Indonesia, "Penilaian
Kembali Aktiva Tetap Untuk Tujuan Perpajakan Bagi
Permohonan Yang Diajukan Pada Tahun 2015 dan
ICEEE 2017 - 2nd International Conference on Economic Education and Entrepreneurship
344

2016",
http://www.ortax.org/ortax/?mod=aturan&page=show
&id=15899, 22 Juni 2016
Menteri Keuangan Republik Indonesia, 2015, Peraturan
Nomor 191/PMK.10/2015, Jakarta, Kementerian
Keuangan Republik Indonesia
Sulastyawati, D., (2014). Hukum Pajak dan Imple-
mentasinya Bagi Kesejahteraan Rakyat. Sekolah
Tinggi Agama Islam Negeri (STAIN) Curup
Bengkulu. Salam; Jurnal Filsafat dan Budaya Hukum.
Sutrisno, A., Bunasor Sanim, Harianto, Setiadi Djohar.
(2011). Analisis Manfaat Insentif Pa-jak Penghasilan
Dan Pengaruhnya Pada Kepatuhan Wajib Pajak. Vol.
4. No. 1 Januari.
Zolt, E., Michael H. Schill. (2015). Tax Incentives:
Protecting the tax base. Paper for Workshop on Tax
Incentives and Base Protection New York. 23-24 April
2015.
Fixed Asset Revaluation: Impact on Taxable Income
345