Forestry to adopt better accounting method

Forestry to adopt better accounting method

JAKARTA (JP): The forestry industry is expected to adopt a
standardized accounting method by the end of this year, says
Minister of Forestry Djamaloedin Soeryohadikoesoemo.

"The Ministry of Forestry will cooperate with the Association
of Indonesian Accountants and some experts from universities to
formulate the standardized accounting methods," Djamaloedin told
reporters on Monday.

He said standardization is needed to determine the precise
level of economic rents that the government or communities can
derive from forest concessions to timber companies.

Indonesian forestry regulations stipulate that timber estates
are state properties which are given out to concessionaires for a
limited period of time.

For the forest industry, economic rents can be regarded as
earnings in excess of total production costs including operating
expenses, depreciation, overhead and transportation costs.

In Indonesia, such earnings are usually obtained from forest
royalties, reforestation funds and corporate taxes from timber
companies.

"Today we have no uniformed way to define the rents," said the
minister.

"I expect that the new accounting method will lead to a levies
collecting mechanism which is closely related to the fluctuation
of the prices of forest-based products," he said.

Indonesia, which currently has 113 million hectares of forests
with reserves of some 2.4 billion cubic meters of timber, last
year exported US$5.47 billion worth of wood products, accounting
for 14.86 percent of the country's total exports.

Forestry economic experts Don Fletcher and Simon Henderson
argue in their joint paper that the absence of a large domestic
log market and the existence of transfer pricing between
concessions and integrated processing industries make the
estimation of the real value of roundwood "contentious" and "open
to manipulation."(hdj)