Page 27 - SUSTAINABILITY ISSUES & COVID-19

03 Evaluation of the Implementation of

Rules for Using Book Value in Merger–

Case Study on Subsidiaries of PT Rajawali

Nusantara Indonesia (Persero)

Megi Christdianti

This study aims to conduct an evaluation of the implementation of the rules for the use of book values that will be used
in the context of a business combination that will be conducted at a subsidiary of PT Rajawali Nusantara Indonesia
Persero. In accordance with what is stated in Article 10 Paragraph (3) of Law Number 36 Year 2008 in the context of a
business merger, the value of acquisition or transfer of assets is determined based on market prices. This study aims to
evaluate the implementation of the rules for the use of book value method that will be used in the context of a business
merger in a subsidiary of PT Rajawali Nusantara Indonesia (Persero). Of the three subsidiaries, PT PG Rajawali I suffered
a loss for 5 years so that by submitting the use of book value, the company’s goals can be achieved. The focus of this
research lies in evaluating the implementation of the rules in using the book value. The method used is qualitative,
through interviews.

The results of the evaluation conducted on the rules for the use of book value show that the three subsidiaries of PT
Rajawali Nusantara Indonesia have not met the requirements for submitting the use of book value to the Directorate
General of Taxes.

Keywords: Book Value Method, Merger

1. INTRODUCTION

In general business practice, companies consistently strive to improve efficiency, competitiveness, and economic added
value for their shareholders, one of which is by taking over control of another company, or better known as a business
merger. To achieve this goal, managers try to reduce costs optimally to obtain maximum profit. Based on Article 1
paragraph (9) of Law Number 40 of 2007 concerning Limited Liability Companies (Company Law), it is explained that a
merger is a legal action taken by one or more companies to merge with another existing company which results in the
assets and liabilities of the company. which merged transferred due to the law to the company accepting the merger
and subsequently the legal status of the merging company ended due to the law.

In-Law Number 7 of 1983 on Income Tax (Income Tax Act) itself, there are two methods of recording accounting on
transaction merger is allowed that is using the book value (book value) and market value (market value) to qualify
applicable. But in fact in the process of merger of recording by using the book value (book value) often suspected
their attempts to avoid taxes. This can be seen when the asset is recorded, the acquiring company will record it the
same as the transferor company by using the calculation of the fiscal depreciation of its fixed assets based on the
remaining useful life of the transferred asset. When a business combination occurs, recording it at book value will make
the company appear unable to cover the amount of loss of the acquiring company.

Unlike the case with the use of market value, business merger transactions will be recorded at the amount that should
have been spent or received based on market prices, including the difference in cost of investment which is considered
again (goodwill) and the book value of the company’s assets. due to liquidation, merger, consolidation, expansion,
splitting, or takeover of a business which is one of the tax objects, giving rise to income tax on the transaction.

This case study research was conducted at PT Rajawali Nusantara Indonesia Persero which is a state-owned company
(BUMN) engaged in agro-industry, pharmaceuticals, and trade. In the agro-industrial business sector, PT Rajawali
Nusantara Indonesia (Persero) has 8 subsidiaries, three of which are located in Java, including PT Rajawali I Sugar Factory,
PT Rajawali II Sugar Factory, and PT Candi Baru Sugar Factory. As the main objective of the company to contribute a
greater return to shareholders, the company took steps through strengthening the capital structure and improve the
performance of business units such.

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