The Transition to IFRS in Indonesia

         

          There are five different convergence approaches a country can implement in adopting the IFRS, namely: 1) adoption of the IFRS entirely; 2) selective adoption of the IFRS or adoption within time interval; 3) IFRS adoption with modification to account for country-specific characteristics; 4) Preserving national accounting standards but in line with the IFRS; and 5) Continuation of national accounting standards (Chand and Patel, 2011, p.15). Of these five approaches, IFRS convergence in Indonesia follows both the second and third approaches, in which IFRS are adopted gradually into local accounting standards and minor modifications are made to align the standards with Indonesian regulations and business environment. This approach has led to different phases in the IFRS convergence programme, in which every phase has a set of objectives that guide the progression of the convergence process.

The advancement of Indonesian accounting standards (1990-2007)

          The second period in the Indonesian accounting standard development started in the early-1990s, fuelled by a significant progress in the development of Indonesian capital market during the time. By the early 1990s, more than 200 firms traded their shares in the Jakarta Stock Exchange, a substantial increase from 24 companies in the mid-1980s (Rosser, 1999; ADB, 2003). The IAI responded to this growth by making major changes in the accounting standard setting process (Rosser, 1999; ADB, 2003).