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).

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.

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

          Accounting standards in any country do not develop in a single point of time; instead, they evolve progressively along different periods. As such, there have been structural changes occurring in different stages of the development of accounting standards in a country (Baylin et al. 1996). The current trend towards the adoption of IFRS represents an important progression in the accounting standard development agenda in many jurisdictions.

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.

Accounting Across The Organization

How Will Accounting Help Me?

        One question that students frequently ask is, " How will the study of accounting help me? " It should help you a great deal, because a working knowledge of accounting is used in other carees include :

        General Management :  Imagine running Ford Motors, Massachusetts General Hospital, Northem Virginia Community College, a McDonald's franchise, a Trek bike shop . All general managers need to understand where the enterprise's cash comes from and where it goes in order to make wise business decisions.

        Marketing : A marketing specialist at a company like Procter & Gamble develops strategies to help the sales force be successful. But making a sale is meaningless unless it is a profitable sale. Marketing people must be sensitive to costs and benefits, which accounting helps them quantity and understand.

Generally Accepted Accounting Principles

          The accounting profession has developed standards that are generally accepted and universally practiced. This common set of standards is called generally accepted accounting principles (GAAP). These standards indicate how to report economic events.

        The Securities and Exchange Commission (SEC) is the agency of the U.S. goverment that oversees U.S. financial markets and accounting standard-setting bodies. The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB). Many contries outside of the United States have adopted the accounting standards issued by the International Accounting Standards Board (IASB). In recent years the FASB and IASB have worked closely to try to minimize the differences in their standards.

Cost Accounting

            Cost accounting is an essential specialty within the accounting field. One of the main objectives of industry is to determine the selling price of the products or the cost of services that are furnished by a company. To establish a selling price that ensures a profit, it is first necessary to determine the costs of making the product or of providing the service. This is the purpose of cost accounting, and many of the procedures of other branches of accounting have been adapted to achive this end.

Special Terms Of Cost Accounting

Cost Accounting : Calculating and controlling the cost of a unit-a single item or a group of items-of a product, service, function, or operation of a business.

Selling Price :  The price at which a product is sold.

Job-order Cost Accounting : A system that expresses the cost of each unit or each batch or job lot of goods manufactured. A job lot is a smaller than normal unit of goods or commodities produced.

Process Cost Accounting : The system used for cost accounting when a product is manufactured or processed continuously. It is suitable, for example, for flour milling, oil refining, and cement production. It uses a fixed period as one of the bases for determining costs.

Prime Cost / Direct Cost : The sum of direct material costs and direct labor costs.

Inventory : A record of goods on hand that is maintained by a business. A manufacturing concern, for example, maintains inventories of raw materials, work in process, and finished goods not yet sold or shipped.

Purchase Order :  An order for goods sent by the buyer or the seller. It describes the merchandise ordered by the buyer from the seller, states the quantity to the bought, gives the expected date of delivery, and sometimes indicates the mode of transportation preferred by the buyer.

Receiving Report : A report that show the kinds and quantities of materials received by the receiving department of a business.

Store Requisition Slip :  Another business paper that shows the description and quantity of materials to the factory. It also specifies the accounts to be debited for the materials; that is, the section or department that should be charged for them.

Overhead : Operating expenses of a business, such as security costs, foremen’s salaries, and bulding-maintenance expenses, that are not chargeable to any one department or product.

Factory Cost : The prime cost plus overhead.

Burden Rate :  The ratio at which indirect costs are allocated to specific jobs or departments.

Full Costing / Absorption Costing :  A costing system that provides an average fixed the cost for a product or process.

Direct Costing / Variable Costing : A costing system that provides an average of the costs that may vary or change in the manufacture of a product.

Standard Cost : Apredetermined cost which is then compared to actual costs to determine variances.

Post by : Rony Sutiyanto