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).

Development of Accounting Standards in Indonesia

          The authority to set accounting standards in Indonesia in the present day is mainly held by the Indonesian Financial Accounting Standards Board (DSAK), an accounting standard setting body within the IAI. Members of the DSAK come from various sectors within the Indonesian accounting environment, including the public accounting profession, the capital market authority, the central bank, accounting academics, and industries. In conducting its duties, the DSAK is advised by the Indonesian Financial Accounting Standards Advisory Council (DKSAK), a consultative body that is also under the IAI. Although the IAI does not have a legal status as a standard-setting body (Kusuma, 2005, p.356), the regulatory framework in Indonesia requires companies to prepare financial statements based on accounting standards set by the accounting professional organisation which is approved by the government.

Accounting Profession

          The first step in the development of the accounting profession in Indonesia was the enactment of the Accountant Designation Act in 1954, which regulates the use of accountant professional designation and the provision of public accounting services by professional accountants. The year 1957 saw the establishment of the Indonesian Institute of Accountants (IAI), the first professional accounting association in Indonesia (Tuanakotta, 2007, p.317). The institute was established to advance the accounting profession and practice in Indonesia, which, in the 1950s was still in its infancy. To achieve the aforementioned goals, the IAI has run various programmes and held important responsibilities, including registering member accountants, organising professional certification programmes, developing ethical codes for accountants, publishing academic and professional journals, and running continuing professional education programmes (IAI, 2012a).

Development of Accounting Standards and the Process of Convergence with International Financial Reporting Standards (IFRS) in Indonesia

Abstract

          Over the last few years there has been an increasing acceptance of the International Financial Reporting Standards  (IFRS)  in  developing  countries.  However,  limited  research  has  been undertaken  in understanding the pathway  of  the transition towards the use of  IFRS in these countries.  This  study examines  the  dynamics  of  accounting  standard  development  in Indonesia  with  emphasis  on  the process  of  convergence  between  the  country’s  national accounting  standards  and  IFRS.  Using teleology  process  theory  as  a  theoretical  lens,  this study  finds  that  different  sets  of  objectives  have initiated  and  directed  the  changes  in Indonesian  accounting  standards  since  their  early  development to the  current  convergenceprogrammes.  In  the  period  of  transition  to  IFRS,  there  have  been  gradual changes  in  the Indonesian accounting standards,  which reflect a steady movement towards the  final  goal of full convergence with  IFRS.  Furthermore,  based  on  Indonesia’s  experience,  this study  also highlights several  issues  and  challenges  in  the  gradual  implementation  of  IFRS,  which include  the  perceived complexity  of  the  standards,  issues  in  professional  judgement,  the availability  of  relevant  training  and education  programmes,  and  the  remaining  differences between national accounting standards and IFRS. Overall, the insights provided by this study may  assist  other  national  and  regional  accounting  standard bodies  in  determining  and evaluating the pathway of IFRS convergence programmes in their region.