Public firms no allowed to amortize forex losses

Public firms no allowed to amortize forex losses

CISARUA, West Java (JP): The Capital Market Supervisory Agency
(Bapepam) will no longer allow publicly listed companies to
record part of their foreign exchange losses on future balance
sheets.

Herwidayatmo, the chairman of the agency, said a regulation
which allowed the companies to amortize part of their current
foreign exchange losses in future financial statements would be
revoked by the end of this month.

Bapepam issued in September 1998 a ruling allowing companies
with huge foreign exchange losses to release part of the burden
from the then current year's balance sheets by recording them in
later years on financial statements.

The ruling was issued to save a large number of listed
companies from being technically bankrupt due to heavy losses in
foreign exchange.

Most of the country's publicly listed companies suffered
losses in 1998 due to a sharp increase in U.S. dollar-denominated
debts in rupiah terms.

Before the crisis broke out in mid-1997 the rupiah exchange
rate was at 2,300 per dollar, but it plunged to between 8,500 and
Rp 10,000 in 1998.

Herwidayatmo said although he understood the rule would help
companies to reduce their debt burden, it was not in line with
international accounting standards.

He also stressed that the revocation would not be retroactive.

"Those companies that already had their foreign exchange
losses amortized for a period of some years do not have to
restate their 1998 financial statement because of the
revocation," he said at a macroeconomic seminar recently held
here by Bank Indonesia, a private think-tank organization Center
for Public Policy Study (LPKP) and giral.com.

However, Herwidayatmo said there was one company that wanted
to restate its 1998 financial statement and cancel the
amortization of its foreign exchange loss.

"That is PT Astra International. The new shareholders of Astra
came to me and asked for permission to restate the company's 1998
financial statement to reflect the internationally accepted
accounting standard of reporting," he said.

"The current foreign exchange loss amortization rule does not
reflect the true condition of a company, so we do not want to let
it apply to Astra's financial statement," Herwidayatmo said,
quoting the new shareholders of Astra who came to him last week.

Herwidayatmo said by restating its 1998 financial statement
Astra might have a higher net loss in 1998 as a result, but would
consequently have a fatter net income for 1999.

"Because Astra is recording all its losses in the year it
occurred, in 1998, and canceling the partial foreign exchange
loss burden previously claimed in 1999," he said.

Herwidayatmo said the agency was also preparing rules on
procedures for opening branch offices by securities companies and
restricting people included on the government's official list of
people with bad records, or locally known as DOT, to sit in key
positions of securities companies.

In addition, the agency is mulling new rules in its effort to
accommodate local start-up Internet companies on local stock
exchanges.

"Local Internet companies should also have their place here.
If not they will go to Hong Kong, Singapore or Nasdaq (United
States) for their share listing," he said. (udi)