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.

Indonesian Accounting Environment

Accounting System

          A country’s accounting system, which is referred to as a set of accounting rules or practices used in financial reporting (Nobes, 1998), is shaped by various factors including those specific within a particular country. As a result, there have been variations in financial reporting practices around the world. A number of factors that influence countries’ accounting systems have been identified in the literature (see Nobes, 1988). Among those factors, perhaps accounting system orientation, stage of economic development, and culture have contributed most in shaping Indonesian accounting system.