Harmonization, Convergence, Adaptation

ACCOUNTING THEORY

Lecturer:
Dr. Murtanto, SE, Ak, MSc.

Group 3:

Raisafira Astriani 023001800054

Mutia Rasya Azzahra 023001801148
Saviera Fasha 023001801199

JURUSAN AKUNTANSI
FAKULTAS EKONOMI DAN BISNIS
UNIVERSITAS TRISAKTI
JAKARTA
2021
The IASB strives to reconcile differences that cannot be explained by differences in the
environment. The objective of the IASB is to formulate and publish accounting standards to be
observed in the presentation of financial statements and to promote their acceptance and
compliance in the world. The standards that have been made by the standard compilers, which
may have referred to IFRS and IAS, are then used as guidelines in accounting records for
companies that are in the area where the standard applies.

1. Harmonisasi

Harmonization of international accounting standards means a process to improve the

comparability of financial reports made by reporting entities in various countries (Meek and
Saudagaran, 1990). Harmonization means that it can also mean a group of countries agreeing
on a similar accounting standard, but requiring that implementation that does not follow
standards must be disclosed and reconciled with mutually agreed standards (Sadjiarto, 1999).
Mogul (2003) defines accounting standard harmonization as a continuous process to ensure
that generally accepted accounting principles are formulated, aligned and updated with
international best practice (GAAPs in other countries) with appropriate modifications and
considering domestic conditions. In simple terms, the harmonization of accounting standards
means that a country does not fully comply with internationally accepted standards. These
countries only make their accounting standards not in conflict with international accounting
standards.

Efforts to harmonize accounting standards began long before the establishment of the
International Accounting Standards Committee in 1973. International accounting
harmonization is one of the most important issues faced by accounting standards makers,
capital market regulatory agencies, stock exchanges, and those who prepare or use financial
reports. Harmonization is flexible and open so that there may be differences between the
standards adopted by the country and the standards international. It's just that efforts are
made to make differences in these standards not contradictory differences. As long as the
difference does not contradict the standard, the country concerned will continue to use it.
Accounting harmonization includes harmonization of:

1) Accounting standards relating to measurement and disclosure.

 2) Disclosures made by public companies regarding securities offerings and listings on
the stock exchange
3) Auditing standards

This harmonization program was strongly supported by member countries of the

International Accounting Standards Committee (IASC) at that time. This program in a short
time was relatively easy to fulfill by IASC members, including Indonesia. This convenience
is due to the fact that the implementation of this program is relatively flexible in several
ways.

First, there is flexibility in the selection of accounting principles that will be used in the
settings in each country. So that each country will choose the accounting principles that are
most appropriate to the environmental conditions in that country. Although the choice of
accounting principles is not the same, as long as they do not conflict with those stipulated in
the IAS, they are still said to be harmonious.

Second, the regulatory language in the standard can use the national language in each country
and is not required to use a specific language. Third, national accounting standards (which
are harmonious with the IAS) can be effectively applied in practice in every IASC member
country at that time (Media Accounting, 2005a).

2. Konvergensi

Convergence in accounting standards and in the context of international standards means that
there will be only one standard. That one standard then applies to replace the standards that
were previously made and used by the state itself. Before there was convergence of
standards, there was usually a difference between the standards made and used in that
country and the international standards.

The convergence of standards will erase these differences slowly and gradually so that in the
future there will be no more differences between the country's standards and the standards
that apply internationally. Indonesia has decided to fully adopt IFRS / IAS but this standard
does not apply to domestic companies. The accounting standard convergence program in
 Indonesia began in 2006. There are four steps taken by the Indonesian Accountants
Association PSAK, namely:

a. Adopt IAS related to fixed assets and financial instruments;

b. Obtain a government perspective regarding the suitability of regulations concerning
unrealized gains or losses;
c. PSAK engages business practitioners to build a path to fair accounting value;
d. PSAK will develop accounting for small and medium enterprises with reference to
the accounting of ASEAN countries.

The stages of IFRS Convergence by Indonesia

Harmonization of accounting standards can be carried out with different convergence
approaches according to the needs and conditions of certain countries. There are four
convergence approaches to accounting standards, namely:
a. Adopt fully but not for domestic companies;
b. Full adoption including for domestic companies;
c. Adopt fully but for some domestic companies;
d. Adopt fully including for all domestic companies; (www.iasplus.com)

3. Adopsi

Karampinis and Hevas (2011) hypothesize and provide empirical evidence that accounting
standard factors alone (including IFRS) are not sufficient to improve the quality of
accounting information. By citing the results of research by Daske et al. (2008) and Ball et al.
(2003), Karampinis and Hevas (2011) argue that the institutional environment for preparing
financial statements, not standards, determines the quality of accounting information. This is
an important issue because IFRS orientation is for the institutional environment with the
common law tradition (Barth et al., 2008; Karampinis and Hevas, 2011). IFRS is prepared
based on a conceptual framework that is similar to the conceptual framework of accounting
standards in common law countries (Barth et al., 2008). Therefore, the benefits of IFRS for
countries with code-law traditions remain an important research question.
Code law countries generally have a more stakeholder-oriented model of financial systems
(Karampinis and Hevas, 2011). Accounting standards are prepared by regulatory agencies
controlled by the state through detailed legislation to achieve uniformity. Company funding
is very dependent on banks so that the capital market is the second choice (Karampinis and
Hevas, 2011). The amount of government intervention in the preparation of accounting
standards and the dominance of banks in corporate funding has resulted in financial reporting
being more oriented towards creditors and taxes (creditor and tax-oriented financial
reporting). In contrast, the financial systems of common law countries tend to be
shareholder-oriented. Accounting standard setting is left to private professional institutions
which accept generally accepted practice as the main basis in the standard development
process. The capital market has a major role in corporate funding so that public disclosure is
a mandatory prerequisite for financial reporting.

In the international business literature, Indonesia is classified in a cluster of code law

countries (La Porta et al. 1998). The results of the research by La Porta et al (1998) and
Djankov (2008) that countries in the code law cluster generally have a weak level of investor
protection and a legal system that is not working well. Weak investor protection results in
concentrated ownership. This is consistent with the findings of Siregar and Utama (2008)
which show the percentage of majority shareholder ownership.

Countries in the code law cluster generally have a banking function that is more dominant
than the capital market in meeting corporate funding needs (La Porta et al., 1998). These
various characteristics of the institutional environment make the need for public disclosure
less important in code law countries than in common law (Karampinis and Hevas, 2011).
This can hamper the objective of IFRS adoption to improve the quality of accounting
information. The findings of Karampinis and Hevas (2011) show that IFRS adoption in an
inappropriate institutional environment causes insignificant improvement in the quality of
accounting information after adoption is carried out. This supports the arguments of
Bradshaw and Miller (2007) and Alali and Foote (2012) that the effect of IFRS adoption on
the quality of accounting information depends on country-specific factors.
 Bibliography

Giri, Efraim Ferdinan. “KONVERGENSI STANDAR AKUNTANSI DAN

DAMPAKNYA TERHADAP PENGEMBANGAN KURIKULUM AKUNTANSI DAN

PROSES PEMBELAJARAN AKUNTANSI DI PERGURUAN TINGGI INDONESIA.”

Jurnal Pendidikan Akuntansi Indonesia, vol. VI, 2008, pp. 7 - 22.

Kuniarti, Novi. “STANDAR AKUNTANSI INTERNASIONAL: HARMONISASI

VERSUS KONVERGENSI.” 2011.