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.

Brief History of Indonesian Economy

         

          Indonesia is a country of about 17,000 islands located in Southeast Asia with a total  area of approximately 1,910,931 square kilometres. The main islands include Sumatera, Java, Bali, Borneo, Sulawesi, Mollucas, Timor, and Papua. The archipelago  spans over the equator and lies between the Indian Ocean and the Pacific Ocean. Malaysia, East Timor, and Papua New Guinea are the countries that share land borders with Indonesia, while other closely located countries include Singapore, the Philippines, and Australia. The capital city of Indonesia is Jakarta, located in the most populous island of Java.

          Statistics show that as many as 237,641,326 people lived in Indonesia as of 2010, making the country the fourth largest country by population after China, India, and the U.S. (Statistics Indonesia, 2012, p.78; UNDESA, 2011). Indonesia has a heterogeneous and multicultural society that stems from numerous indigenous ethnicities with different  customs  and cultures. lthough there are countless of traditional languages spoken within particular ethnics, Bahasa Indonesia is the formal national language. Islam is the predominant religion in Indonesia and there are also followers of Catholics, Christian, Hindu, Buddhist, and Confucianism. Although being a predominantly Muslim country, Indonesia is not an Islamic state.Indonesia proclaimed its independence in 1945, after being colonised by the Dutch for  about 350 years and being occupied by Japan for three and a half years.