Government finally issues ruling on assets revaluation

Government finally issues ruling on assets revaluation

JAKARTA (JP): The government issued yesterday its long-waited
ruling on assets revaluation, which allows companies to revalue
their fixed assets annually rather than quinquennially as
previously governed.

This will enable troubled listed companies to pump up their
capital base from asset revaluations to save them from being
delisted from the local bourse.

Finance minister decree No. 304/KMK.04/1998, dated August 14,
however, still requires corporations to pay 10 percent income tax
on capital gains resulting from the revaluation of assets.

Many parties concerned, including the Association of
Indonesian Publicly Listed Companies and even the market watchdog
Bapepam, had been seeking government clearance to grant tax
concessions on such capital gains.

The only leeway the ruling gives is that corporations which
pursue mergers -- not only banks as previously ruled -- could
spread the payment of the income tax over five years.

The head of the legal and public relations bureau at the
Ministry of Finance, Hadiyanto, said companies wishing to revalue
their assets must have settled all their tax obligations first.

Hadiyanto said the revaluation of fixed assets -- land,
buildings and others -- should not done with the aim of selling
the assets.

If the revalued assets are sold within five years of the
revaluation, the sellers must pay 15 percent income tax, on top
of the 10 percent capital gains tax.

Despite the imposition of the tax, analysts said the new
ruling would allow financially troubled listed companies to avoid
being axed from the stock exchange.

According to the existing stock market regulations, listed
firms which suffered losses in the last three consecutive years
or which book financial losses on their balance sheets that
amount to half or more of their paid-up capital at the end of the
latest year will be delisted.

Thirty-four companies currently listed on the Jakarta Stock
Exchange have been threatened with delisting due to their poor
financial positions.

Trimegah Securindo Lestari's research head, David Chang, said
most companies were currently under-valued based on historical
valuations of their assets on their balance sheets.

"For example, imported machinery is significantly more
expensive now than before the rupiah's depreciation," Chang said.

The rupiah's 80 percent depreciation against the U.S. dollar
over the past year has dragged many companies to the brink of
insolvency and delisting, as their paid up capital has been
severely eroded by foreign exchange losses. (rid)