AKUNTANSI INTERNASIONAL

CHAPTER XI: TRANSFER PRICING AND TAXATION INTERNATIONAL

ASEP SURYADI

20208200

4EB11

1. Basic concepts of international taxation

The complexity of the laws and rules that determine the tax for foreign companies and the profits generated abroad actually derived from some basic concepts

a. Tax neutrality is that the tax has no effect (or neutral) of the resource allocation decisions.

b. Tax equity is that taxpayers who are facing similar situations should pay similar taxes and the same thing but on disagreements between how to implement this concept.

Diversity of the National Tax System

Effective management of potential tax needs understanding of the national tax system is very different from one country to another.

Various Kinds of taxes

Five kinds of taxes, namely:

1. Corporate income tax

2. Tax levy

3. Value added tax

4. Border tax

5. Transfer tax

Tax Burden

As more and more companies are reducing the marginal corporate tax rate, many states are expanding the tax base of the company. In the real world is rarely effective tax rate equal to the nominal tax rate. Thus it is inappropriate to base the comparison between countries on tax rates must be. Besides low tax rate does not necessarily mean a lower tax burden. Internationally, the tax burden must always be determined by observing the effective tax rate.

Tax Administration System

For simplicity there are two systems, namely:

1. Classical system

2. Integrated system

Foreign tax incentives

Many states offer tax incentives to attract foreign investment. Incentives may include tax-free cash grants are used for the cost of fixed assets of new industrial processes or remission of taxes to pay for some period of time.

Tax competencies that are Hazardous

All world trends that lead to a reduction in corporate income tax rate is the direct impact of tax competition. The competition is conducted by a tax haven country would benefit if it can make government more efficient. While the harmful effects if the transfer tax revenue for governments that actually requires these revenues to provide services required by businesses.

Taxation of Income from Foreign Sources and Double Taxation

Most countries apply the principle of the world and impose taxes on profits or income of companies and citizens in it, regardless of the country. The underlying idea is that a foreign subsidiary of a local company is a local company that happens to operate overseas.

2. Connection with the tax concept of income from abroad

Each country claims the right to impose taxes on income generated within its borders. However, the national philosophy on the taxation of resources from abroad is different and this is important from the perspective of a tax planner. Most countries (including Australia, Brazil, China, Czech Republic, Germany, Japan, Mexico, Netherlands, United Kingdom, and United States) to apply the principles throughout the world and impose taxes on profits or income of the company and the citizens in it without looking at the territory of the State. The underlying idea is that a foreign subsidiary of a local company is a local company that happens to operate overseas.

3. Reason for a foreign tax credit

Foreign tax credit can be counted as a direct credit on income tax paid on earnings branch or subsidiary and any tax withheld at source such as dividends, interest, and royalties are sent back to domestic investors. The tax credit cans also estimate if the amount of foreign income tax paid is not too clear.

Tax Credit Restrictions

Foreign tax credit limitation applies separately to U.S. tax on foreign source income tax for each of the following types of income:

1. Passive income

2. Financial services revenue

3. Income levy high taxes

4. Transportation revenue

5. Dividend for each of the foreign company with a share of ownership by 10% to 50%

Tax Treaty

Tax treaties affect the tax levy on dividends, interest and royalties paid by companies in the country to foreign shareholders. These agreements typically provide a reciprocal reduction of tax levies on dividends and royalties are often exempt from taxes and interest charges.

Consideration of Foreign Currencies

Gains or losses in foreign currencies are generally located between U.S. sources and foreign sources with reference to the domicile of the taxpayer in its accounting books reflect the assets or liabilities in currencies foreign. Source gain or loss is the United States.

Dimensions Tax Planning

Observations on the issue of tax planning starts with two basic things:

1. Tax considerations should never attempt control strategic

2. Constant changes in tax laws limit the tax benefit in the long-term planning

Organizational Considerations

If the overseas operations initially predicted to cause harm may be advantageous if the taxes are organized in a branch at an early stage. If the subsidiary is organized in a tax haven country that does not tax at all, then the tax deferral will increasingly look attractive.

4. International tax planning within multinational corporations

In the tax planning of multinational companies have certain advantages over a purely domestic firm because it has greater flexibility in determining the geographic location of production and distribution systems. This flexibility provides the opportunity to utilize their own national tax yuridish differences so as to lower the overall corporate tax burden.

The observation of these tax planning issues at the start with two basic things:

a. Tax considerations should never control business strategy

b. Changes in tax laws are constantly limit the benefits of tax planning in the long term.

5. Variables in the international transfer pricing

Transfer prices set a monetary value on the exchange between firms that take place between the operating units and is a substitute for market prices. In general, the transfer price is recorded as revenue by one unit and the unit cost by others. Cross-border transactions of multinational corporations are also open to a number of environmental influences that created the same time destroying the opportunity to increase profits through transfer pricing. A number of variables is tax rate competition inflation rates, currency values, limitations on the transfer of funds, political risk and the interests of joint venture partners are very complicated transfer pricing decisions.

Transfer pricing is anything new lately arise. Transfer pricing in the United States evolved along with the decentralization movement that influenced many American businesses during the first half of the 20th century. Once the company expands internationally transfer pricing issues are also expanding rapidly. There are factors such as:

1. Tax factor

2. Factor Tariff

3. Competitiveness Factors

4. Job Evaluation factors

6. Fundamental problems in the transfer pricing method

In a world with very competitive transfer rates, it will be a big deal when they wanted to transfer pricing resources and services between firms. However, there is rarely a competitive external market for products that are transferred between related entities is special. Problem of determining these costs are felt in the international level, concept of cost accounting is different from one country to another.

AKUNTANSI INTERNASIONAL

CHAPTER X: FINANCIAL RISK MANAGEMENT

ASEP SURYADI

20208200

4EB11

1. Identification of the main components of the foreign currency risk

To minimize exposure faced by the volatility of foreign exchange rates, commodity prices, interest rates and securities prices, the financial services industry offers a lot of financial hedging products, such as swaps, interest rate, and also an option. Most financial instruments are treated as items outside the balance sheet by a number of companies that conduct international financial reporting. As a result, the risks associated with using this instrument is often covered up, and until now the world's accounting standard makers to be in discussions on the principles of measurement and reporting are appropriate for these financial products. The material of this discussion is to discuss one of the internal reporting and control issues associated with a very important

There are several key components in the foreign currency risk, namely:

a. Accounting risk (the risk of accounting): The risk that the preferred accounting treatments of a transaction are not available.

b. Balance sheet hedge (balance sheet hedging): Reducing foreign exchange exposure faced by differentiating the various assets and liabilities of a company abroad.

c. Counterparty (the opponent): Individuals / organizations who are affected by a transaction.

d. Credit risk (credit risk): The risk that the opponent had failed to pay its obligations.

e. Derivatives: the contractual agreement creating rights or obligations specific to the value derived from other financial instrument or commodity.

f. Economic exposure (economic exposure): Effect of changes in foreign exchange rates against the cost and revenue in the future.

g. Exposure management (exposure management): Preparation of structure in companies to minimize impacts exchange rate against changes in earnings.

h. Foreign currency commitment (commitment to a foreign currency): Commitment to the sale / purchase of the company denominated in foreign currencies.

i. Inflation differential (difference of inflation): The difference in the rate of inflation between two countries or more.

j. Liquidity risk (liquidity risk): The inability to trade a financial instrument in a timely manner.

k. Market discontinuities (discontinuities market): Changes in market value suddenly and significantly.

l. Market risk (market risk): risk of losses due to unexpected changes in foreign exchange rates, commodity loans, and equity.

m. Net exposed asset position (the net asset position of the potential risk): Excess assets position of the position of liabilities (also referred to as a positive position).

n. Exposed net liability position (potential risk of the net liability position): Excess liability position to the position of the asset (also referred to as a negative position).

o. Net investment (net investment): An asset or net liability position that happens to a company.

p. National amount (national number): Total principal amount stated in the contract to determine the settlement.

q. Operational hedge (hedging operations): Protection foreign exchange risk that focuses on variables that affect a company's expenses income and in foreign currency.

r. Option (option): The right (not obligation) to buy or sell a financial contract at a specified price before or during a specific date in the future.

S. Regulatory risk (regulatory risk): The risk that a law limiting the public will mean the use of a financial product.

t. Risk mapping (risk mapping): Observing the temporal relationship with the market risks of financial reporting variables that affect the value of the company and analyze the possibility of occurrence.

u. Structural hedges (hedge structural): Selection or relocation of operations to reduce the overall foreign exchange exposure of a company.

v. Tax risk (the risk of tax): The risk that the absence of the desired tax treatment.

w. Translation exposure (translation exposure): Measuring the effect in the currency of the parent company of the change in foreign exchange for the assets, liabilities, revenues, and expenses in foreign currencies.

x. Transaction risk potential (the potential risks of the transaction): Advantages or loss foreign exchange arising from the settlement or conversion transaction in foreign currencies.

y. Value at risk (the value of the risk): Risk of loss on trading portfolio of a company which is caused by changes in market conditions.

z. Value drivers (trigger value): The accounts of the balance sheet and income statement yang affect value of the company.

2. Manage foreign currency risk

Risk management can enhance shareholder value by identifying, controlling / managing the financial risks faced by actively. If the value of the company to match the present value of future cash flows, active management of potential risks can be justified by the following reasons:

a. Exposure management helped in stabilizing the company's cash flow expectations. Flow is more stable cash flows that can minimize the earnings surprise, thereby increasing the present value of expected cash flows. Stable earnings also reduce the likelihood of default and bankruptcy risk, or risk that profits may not be able to cover contractual debt service payments.

b. Active exposure management allows companies to concentrate on the major business risks. For example in a manufacturing company, he can hedge interest rate risk and currency, so it can concentrate on the production and marketing.

c. Lenders, employees, and customers also benefit from exposure management. Lenders generally have a lower risk tolerance than the shareholders, thereby limiting the exposure of companies to balance the interests of shareholders and bondholders. Derivative products also allow pension funds managed by the employer obtain a higher return by giving the opportunity to invest in certain instruments without having to buy or sell the related real instrument. Due to losses caused by price and interest rate risk of certain transferred to the customer in the form of higher prices, limiting exposure management of risks faced by consumers.

3. Translation risk

Companies with significant overseas operations prepare consolidated financial statements that allow the readers of financial statements to gain a holistic understanding of the company's operations both domestically and abroad. The financial statements of foreign subsidiaries are denominated in foreign currencies are presented again in the currency of the parent company. The process of re-presentation of financial information from one currency to another currency is called translation. Translation is not equal to the conversion. Conversion is the exchange of one currency to another currency physically. Translation is just a change of monetary units, such as only a balance sheet re-expressed in GBP are presented in U.S. dollar equivalent value.

Potential risk of these measuring translational effects of changes in foreign exchange against domestic currency equivalent value of assets and liabilities denominated in foreign currency held by the company. Because the amount of foreign currency is generally translated into domestic currency equivalent value for purposes of monitoring or management of external financial reporting, translational effects that pose an immediate impact on the desired profit.

Translation risks can be calculated in 2 ways, namely:

a. Said to be positive when the potential risk of exposure to assets is greater than the liabilities (ie items in foreign currencies are translated based on the exchange rate now. Devaluation of foreign currencies relative to the reporting currency (foreign currency exchange rate decreases) causing translational losses. Revaluation of foreign currency (foreign currency exchange rate increases) making a profit translation.

b. Potential downside risks if the assets exceed the liability exposure to exposure. In this case, the devaluation of foreign currency translation gains cause. Revaluation foreign currency translation losses caused.

In addition to the potential risks of translational traditional accounting measurement of the potential foreign exchange risk is also centered on the potential risks of the transaction. Potential risks associated with the transaction gains and losses in foreign exchange rates arising from the settlement of transactions denominated in foreign currencies. Transaction gains and losses have a direct impact on cash flow. Potential risks of the transaction report contains items that generally do not appear in conventional financial statements, but it raises transaction gains and losses as foreign currency forward contracts, purchase commitments and future sales and long-term lease.

4. Transaction risk

To minimize or eliminate the potential risks, it takes a strategy that includes the balance sheet hedging, operational, and contractual. Balance sheet hedging can reduce the potential risks facing the company by adjusting the level and value-denominated monetary assets and liabilities are exposed. Focusing on operational hedging variables affecting revenues and expenses in foreign currencies. Structural hedging includes relocation of manufacturing to reduce the potential risks facing the company or changing the State which is a source of raw materials and component manufacturing. Contractual hedging was developed to provide greater flexibility for managers to manage the potential risks faced by foreign exchange.

5. Differences in accounting risk and economic risk

Management accounting plays an important role in the process of risk management. They assist in the identification of market exposure, quantify the balance associated with alternative risk response strategy, the companies faced a potential measure of risk, noting certain hedging products and evaluate the hedging program.

The basic framework is useful for identifying different types of market risk can potentially be referred to as risk mapping. This framework begins with the observation of the relationship of the various market risks triggering a company's value and its competitors.

The trigger value refers to the financial condition and operating performance items that affect the main financial value of a company. Market risks include the risk of foreign exchange rates and interest rates, and commodity and equity price risk. State the source of the purchase currency depreciates in value relative to domestic currency country, and then these changes can lead to domestic competitors able to sell at lower prices, is referred to as the risk of facing currency competitive. Management accountants have to enter a function such that the probability associated with a series of output values of each trigger.​​

Another role played by accountants in the process of risk management involves balancing the quantification process relating to the alternative risk response strategies. Foreign exchange risk is one of the most common forms of risk and will be faced by multinational companies. In the world of floating exchange rates, risk management includes:

A. anticipated exchange rate movements,

B. measurement of exchange rate risk faced by the company,

C. design of appropriate protection strategies,]

D. manufacture of internal risk management control.

Financial managers must have information about the possible direction, timing, and magnitude of changes in exchange rates and to develop adequate defensive measures more efficiently and effectively.

6. Exchange hedging strategy and the required accounting treatment

After identifying potential risks, the next is designing hedging strategies to minimize or even eliminate the potential risk. This can be done with balance sheet hedging, operational, and contractual.

a. Balance Sheet Hedging

Protection strategy by adjusting the level and value of monetary assets and liabilities denominated exposed companies, which will reduce the potential risks facing the company. Example of a hedging method subsidiaries located in countries that are vulnerable to devaluation is:

• Maintain cash balances in local currency at the minimum level needed to support current operations.

• Restore the earnings above the required amount of capital to the parent company untukekspansi.

• Speeding (ensure-leading) the receipt of outstanding receivables dagangyang in local currency.

• Delay (slow-lagging) the payment of debt in local currency.

• Accelerate the payment of debts in foreign currencies.

• Invest surplus cash into the stock of debt other and asset in local currency which was less affected by devaluation losses.

• Invest in assets outside the country with a strong currency

b. Operational Hedging

Focusing on operational hedging variables affecting revenues and expenses in foreign currencies. More stringent cost control allows a greater margin of safety against potential currency losses. Structural hedging includes relocation of manufacturing to reduce the potential risks facing the company or changing the state is the source of raw materials and component manufacturing.

c. Contractual Hedging

One form of hedging with financial instruments, both the derivative instrument and the basic instrument. These instrument products include forward contracts; futures, options, and the mix of all three are developed. To provide greater flexibility for managers to manage the potential risks faced by foreign exchange.

Accounting Treatment

Before a standard is created, global accounting standards for derivative products is incomplete, inconsistent and developed gradually. Most financial instruments, that are executable, be treated as items outside the balance sheet. Then the FASB issued FAS 133, FAS 149 is clarified through the month of April 2003, to provide a single, comprehensive approach to accounting for derivatives and hedging transactions. No IFRS. 39 (revised) contain guidelines for the first times provide universal guidance on accounting for financial derivatives.

Basic provisions of this standard are:

a. Derivative instruments are recorded on the balance sheet as assets and liabilities. Derivative instruments are recorded at fair value, including those attached to the main contract is not carried at fair value.

b. Gains or losses from changes in fair value of derivative instruments, not including the assets or liabilities, but are recognized as income if it is planned as a hedge.

c. Hedge must be highly effective in order to deserve a special accounting treatment, the gain or loss on the hedging instrument exactly offset the gains or losses should be something that is hedged.

d. Hedging relationships must be documented in full for the benefit of readers of the report.

e. Gains / losses from net investment in foreign currency (asset or liability position of the net exposure) were initially recorded in other comprehensive income. Subsequently reclassified into current earnings if the subsidiary is sold or liquidated.

f. Gains / losses from hedge against future cash flows are uncertain, such estimates of export sales, are initially recognized as part of comprehensive income. Gains / losses recognized in earnings when the transaction is expected to occur that affect earnings.

However, although the rules guiding the FASB and IASB issued have a lot to clarify the recognition and build derivatives, there are still some problems. The first relates to fair value. The complexity of financial reporting has also increased if the hedge is deemed ineffective to offset foreign exchange risk.

7. Accounting and control problems, related to exchange rate risk management of foreign currency

Examples of accounting and control issues associated with the risk management of foreign exchange can be seen in the following cases:

These companies continuously create and implement new strategies to improve their cash flow in order to increase shareholder wealth. It does require some expansion strategy in the local market. Other strategies require penetration into foreign markets. Foreign markets can be very different from the local market. Foreign markets creates opportunities increased incidence of corporate cash flow.

The number of barriers to entry into foreign markets that have been revoked or reduced, encouraging companies to expand international trade. Consequently, many national companies become multinational companies (multinational corporation) that are defined as companies engaged in some form of international business.

MNC own purpose generally is to maximize shareholder wealth. Goal setting is very important for an MNC, as all decisions must be made to contribute to the achievement of these goals. Any corporate policy proposals not only need to consider the potential return, but also its risks. An MNC must make decisions based on the same goal with the goal of purely domestic firms. But on the other hand, MNC companies have a much wider opportunity, which makes the decision became more complex.

There are several constraints faced by MNC companies such as, environmental constraints, regulatory constraints, and ethical constraints. Environmental constraints can be seen from the different characteristics of each country. Regulatory constraints of each country regulatory differences that exist such as, taxes, currency conversion rules, as well as other regulations that may affect the cash flows of subsidiaries. Constraint itself is described as an ethical business practices vary in each country.

MNC, in doing international business, in general can use the following methods:

• International trade

• Licensing

• Franchising

• The joint venture

• Acquisition of companies

• Establishment of new subsidiaries abroad

International business methods require direct investments in operations abroad, or better known as the Direct Foreign Investment (DFI). International trade and licensing is usually not considered a DFI because they do not involve direct investment in overseas operations. Franchising and joint ventures tend to ask for direct investment, but in relatively small amounts. The acquisition and establishment of new subsidiary is the largest element of DFI.

Various opportunities and advantages of a MNC are not free from risks that would arise. Although international business can reduce the exposure of an MNC to the economic conditions of their home country, international business usually also increase the MNC's exposure to exchange rate movements, economic conditions abroad, and political risk. Most of the international businesses require the exchange of one currency with another currency to make payments. Because the exchange rate continues to fluctuate, the amount of cash required to make payments is also uncertain. Consequently, the number of currency units of country of origin is required to pay may change even if its suppliers do not change the price. In addition, when multinationals enter foreign markets to sell products, the demand for such products depends on economic conditions in those markets. Thus, the multinational company's cash flow is affected by economic conditions overseas.

Management can use the controls on foreign currency exchange rates by hedging. However, any financial risk management strategy should evaluate the effectiveness of the hedging program. Feedback from the evaluation system that is running will help to develop the institutional experience in the practice of risk management. Performance assessment of risk management program also provides information about when the current strategy is no longer appropriate to use. So basically, effective financial control is a system of performance evaluation.

Performance evaluation system proved useful in various sectors. These sectors include, but are not limited to, the corporate treasury, purchasing and overseas subsidiaries. Control of the company's treasury includes the entire performance measurement program exchange risk management, hedging is used to identify, and reporting the results of the hedge. The evaluation system also includes documentation on how and to what extent the company treasury helps other business units within the organization.

In many organizations, foreign exchange risk management is centralized at corporate headquarters. This allows the managers of subsidiaries to concentrate on its core business. However, when comparing the actual and expected results, the evaluation system must have a reference that is used for compare success of the company's risk protection.

AKUNTANSI INTERNASIONAL

CHAPTER VIII: INTERNATIONAL FINANCIAL ANALYSIS

ASEP SURYADI

20208200

4EB11

1. The difficulties of international business strategy analysis and basic strategy for the collection of information

Analysis of business strategy is an important first step in the analysis of financial statements. This analysis provides a qualitative understanding of the company and its competitors related to the economic environment. By identifying the drivers of profit and risk factor is the main business, business strategy or business analysis will help the analyst to make a realistic prediction.

The difficulties of analysis of international business strategy:

a. Availability of information

Analysis of business strategy particularly difficult in some countries due to lack reliably information about macroeconomic developments. Obtain information about the industry is also very difficult in many countries and the number and quality of information companies are very different. Availability of specific information about the company is very low in developing countries. Lately, many large companies that keep records and raise capital in foreign markets and have expanded their disclosure voluntarily switch to accounting principles that are recognized globally as an international financial reporting standards.

b. Recommendations for analysis

Data limitations make the effort to analyze the business strategy by using traditional research methods to be difficult. Often frequent trips to study the local business climate and real industry and company operations, particularly in emerging market countries.

Required due to the increasing tendency of international investment and be done with the intention that the financial data can be compared. Sources of information for international financial statement analysis are:

- The financial statements, supporting schedules and notes to financial statements

- The background of wealth and corporate disclosure.

Analysis techniques that have been used International Finance are:

- Trend Analysis

Comparing the data items periodically for 2 years or more as a trend of profits, debt ratings, changes in revenue, etc. geometric growth.

- Ratio Analysis

Compare one item with another item of financial statements in order to obtain a common understanding of the company's profitability, leverage, liquidity and efficiency.

Returns indicators:

· Income per share = Net profit growth of common stock

Total shares of common stock outstanding

· Return on assets = Net income

Total Assets

· Return on equity = Net income

Equity owners

Liquidity and Risk Indicators:

· Current Ratio = Current Assets

Debt smoothly

· Debt to equity ratio = Total Debt

Equity owners

a. Depreciation adjustment

Depreciation will affect profits, it is necessary to consider the age of the functions that must be decided asset management.

b. LIFO to FIFO inventory adjustment

Inventories should be converted into the FIFO method

c. Reserve

Reserves are the company's ability to pay or cover expenses for removing the load

d. Reformulation of Financial Statements

Adjustment of some of the changes after a few calculations on the points above TSB.

2. Measures analysis of accounting

The purpose of accounting analysis is to analyze the extent to which the company reported results reflect the economic reality. Analysts need to evaluate policy and accounting estimates, and analyze the nature and flexibility complete accounting of a company. The managers of the company are allowed to make a lot of considerations related to the accounting, because they know more about the financial condition and operations of their companies. Reported earnings are often used as a basis for evaluating the performance of their management.

The steps in evaluating the quality of accounting of a company:

a) Identify the main accounting policies

b) Analyze the flexibility of accounting

c) Evaluate the accounting strategy

d) Evaluate the quality of disclosure

e) Identification potential problems

f) Make adjustments for accounting distortions.

3. Accounting analysis of the effect of accounting between countries and the difficulty in obtaining the necessary information

Analysts need to evaluate policies and accounting estimates, and analyze the nature and scope of a company's accounting flexibility. Effect on the measurement of quality of accounting, and auditing are very dramatic.

4. Mechanisms for settling differences between nations accounting principles

Several approaches can be done as follows:

- Some analysts present the foreign accounting resize according to a group of internationally recognized principles or according to other, more general basis.

- Some others develop a complete understanding of accounting practices in a particular group of countries and limited their analysis to firms located in these countries.

5. Difficulties and weaknesses in international financial statement analysis

a. Access to information

Information about thousands of companies from around the world has been widely available in recent years. Sources of information in countless numbers up through the World Wide Web (WWW). Companies in the world today have a website and annual reports are available for free of charge from various other sources.

b. Timeliness of information

Timeliness of financial statements, annual reports, reports to regulators vary in each country.

c. Barriers of language and terminology.

d. Foreign currency issues.

e. Differences in the type and format of financial statements.

6. How to use the www for information Research Company?

Many companies do not make optimum use of disclosure of corporate information via the website, both for financial and corporate sustainability. Another finding in this study is that many companies can not provide information for investors, most of the information presented in the company's website is about the products or services produced and the many companies that do not update the information presented.

a. Internet Financial and Sustainability Reporting

Since 1995, there have been developments of empirical research related to Internet Financial Reporting (IFR), which reflects the development of forms of corporate disclosure. Some studies examine the factors that influence disclosure policy in the company's website, such as research conducted by Pirchegger and Wagenhofer (1999) and Saso and Luciana (2008a). Some studies examine the nature and expansion of financial reporting on the company website as an instrument that relate to the stakeholder. Cheng, Lawrence and Coy (2000) develop an index to measure the quality of disclosure IFR at 40 large companies in New Zaeland. The results Cheng, Lawrence and Coy (2000) showed that 32 (80%) companies have a website and 70% of the samples presented financial information on a company website. And of the 32 companies that have websites shows that only 8 (25%) companies that have a value above 50%. Related research on the internet financial reporting by Saso Indonesia and Luciana (2008), which test the quality of information disclosure on the website of the banking industry that went public on the Stock Exchange. By using an index developed by Cheng, Lawrence and Coy (2000) and 19 samples of the banking industry, Saso and Luciana (2008) provide evidence that the diversity of information disclosure on the website of the banking industry in Indonesia. Another finding in this study indicate that the banking industry are not many websites that optimize the use of Internet technology as a means of corporate disclosure, and only displays information about banking products only. While research related to sustainability reporting on the company website by Saso and Luciana (2008b), and provide evidence that of 54 samples only 10 samples are present sustainability reporting on the website main menu, and the low quantity and quality of information submitted in connection with information the company corporate sustainability (sustainability reporting). Another study conducted by Luciana and Saso (2008a and 2008b), to test the quality of information disclosure on the website of the banking industry 19 and 35 companies that fall within the LQ-45. This study provides evidence that the banking industry has the quality of information disclosure on the website to the component technology and user support is higher than the companies that entered the category of LQ-45.

b. Corporate Social Responsibility

Understanding and awareness of business entities to maintain good relations with all stakeholders in an effort to minimizing negative impacts and maximizing positive impacts of the operational activities of the company towards the development to be continue this is now understood as a CSR (Corporate Social Responsibility. Strengthening the sustainable development paradigm and corporate social responsibility initiatives CSR reporting or making social and environmental performance are considered as important as the reporting of economic performance. Biggest problem is that the quality of non-financial reports is not yet as good as the quality of financial reporting. In addition to far adrift age (> 500 vs. 10-20 years), the gap between the two is marked by a degree of formality, the destination number and interval report. Formalization financial statements have been very clear, with the advent of GAAP, IFRS and reporting standards in each country. Almost all are legally binding. Meanwhile, the non-financial reports comprehensive the standard of the Global Reporting Initiative (GRI)-is still voluntary. Companies that do not follow the GRI standards have demonstrated remarkable variety in the format non-financial report. If the financial report is mainly aimed at investors and institutions governing a country investments in , nonfinancial report is intended for all stakeholders (including investors as well). Consequently, how the reporting will be very varied in accordance with the intended stakeholders. Finally, the financial report has financial fixed interval is annual and quarterly, while non-financial reports are usually in the form of reports years or two years, not even fixed. Gazdar (2007) states there are four things that make this is why non-financial reporting to be very important:

First, the company's reputation. The more transparent companies in those aspects that are required by all stakeholders, the higher also the reputation of the company. Of course, if the reported performance is good and valid. Therefore, companies should first improve its performance seriously. Validity is also very important, because stakeholders will never forgive a company that does public deception.

Second, serving the demands of stakeholders. Stakeholders are parties who are affected by and could affect the company in achieving its goals. Of course, those who influenced his life by the company are entitled to know the aspects that come into contact with their lives. Those who could affect the company is very necessary to get the right information, so that their influence can be directed to the appropriate destination.

Third, help the company make decisions. A good performance report would certainly include indicators that will help companies see the strengths and weaknesses of him. Company can be a little quieter in the aspect that the indicators show strength. On the other hand, companies need to devote greater resources to those aspects that seem weak. Periodic have Report Company with a consistent indicator is needed here, so the ups and downs of the performance can be monitored and addressed with appropriate decision.

Fourth, making investors easily understand the performance of the company. As that are already disclosed above, there is a higher demand from investors to be able to find out the real performance of the company. Long-term investors really want to know whether the embedded capital is safe or not. Companies that have social and environmental performance have a high likelihood that it is better to continue its business, and investors would be more interested to invest in these companies.