Macquarie University
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The adoption of accrual accounting in Indonesia: a story of seeking legitimacy, developing hegemony and confusions

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posted on 2022-03-28, 15:48 authored by Tri Jatmiko Wahyu Prabowo
This research is inspired by the compexities of the adoption of accrual accounting, which have been widely explored in public sector accounting literature. This research intends to explore the adoption of accrual accounting in the Indonesian public sector. Using case-based research the research is underpinned by theory to interpret the process of accrual accounting adoption in Indonesia and adopts qualitative research methods, including in-depth interviews with senior regulators of public sector reform in Indonesia and extensive reviews of documents and archives, to construct a historical analysis of public sector accounting in Indonesia. Paper one identifies events that stimulated the adoption of accrual accounting in Indonesia. In-depth interviews were conducted with senior accountants involved in setting the regulations of these public sector reforms in order to gain insight into the motivations for adoption and the decision-making process of implementation. These interviews reveal two milestones in the process of public sector accounting reform in Indonesia. The first was the ratification of the Law of State Finance No. 17/2003, in which there was a stipulation that governments (both central and local governments) should implement accrual accounting in 2008. Interviewees stated that this implementation of accrual accounting was motivated by a desire to avoid sanctions from the International Monetary Fund (IMF). The Government of Indonesia expected the IMF to provide bailout funds to restore the Indonesian economy, which had been devastated by the 1997 Asian Financial Crisis. The second milestone was a written plea from the Supreme Audit Institution (SAI). in 2008. This letter pleaded for the Government of Indonesia to fulfil the stipulation of the Law of State Finance No. 17/2003. In the same year, the Government of Indonesia and the Parliament agreed to implement accrual accounting, but to delay the implementation to 2015. This delay was designed to avoid allegations of unconstitutional behaviour, when, in 2008 and 2009, the Government of Indonesia was unable to follow the stipulation of the State Finance Law 17/2003. Paper one applies a new institutional theory perspective to examine whether these decisions were efforts aimed at seeking legitimacy. Paper two aimed to explain to what extent the IMF, the World Bank and other aid donors influenced accrual accounting adoption in Indonesia. This study used in-depth interviews with members of the Board of the Indonesian Government Accounting Standard to ascertain the influence of international organisations in the adoption process. The data reveals that international organisations influenced the development process consistent with hegemony theory in which a dominant class has influence in society. This paper reaches four findings. First, the IMF strongly encouraged the Government to adopt accrual accounting in the post-recovery period after the Asian crisis (1998–2004), but not in the later period (2005–2014). In the later period, many interviewees stated that many international organisations, but not the IMF, contributed to the process of accrual adoption. Second, several interviewees also stated that they obtained knowledge in relation to accrual accounting adoption from individual interactions. Third, consistent with hegemony theory, this research finds that the international organisations emphasised the role of the intellectual in influencing accrual accounting adoption. Fourth, many of the key actors interviewed for this research gave consent to the influence of those international organisations in the adoption of accrual accounting in Indonesia. The abovementioned finding indicates that the adoption of accrual accounting was motivated by NPM reforms. The IMF supports NPM reforms because of a neo-liberal philosophic support for a market-based economic system. A review of the academic literature suggests that the benefits of the adoption of accrual accounting are questionable. However, this research finds that the influences from international organisations led the Indonesian senior accounting regulators to perceive that accrual accounting was indispensable. That perception was used as a rationale in deciding to adopt accrual accounting. Based on the data collected, it can be argued that while accrual accounting has been implemented in Indonesia, it has not been adopted, that is, NPM philosophy coupled with hegemonic influences and attempts to seek legitimacy have meant that the story of accrual accounting adoption is one of confusion and complexity. Overall, this thesis provides empirical evidence to highlight that public sector reforms are complex, especially in new emerging market countries such as Indonesia, where the intentions underpinning reforms may be difficult to realise and driven by factors outside of the control of those tasked with adoption. The study shows that public sector accounting reforms in developing countries should not be considered in the same way as reforms in developed countries.


Table of Contents

Chapter One. Introduction -- Chapter Two. Literature review -- Chapter Three. Paper one - Two stimuli in accrual accounting adoption in Indonesia -- Chapter Four. Paper two - The role of international organisations in accrual accounting adoption in Indonesia : is it coercive influence? -- Chapter Five. Paper Three - Analysis of alignment between public sector reforms in Indonesia and new public management -- Chapter Six. Conclusion, implications and limitations.


Theoretical thesis. Bibliography: pages 217-247

Awarding Institution

Macquarie University

Degree Type

Thesis PhD


PhD, Macquarie University, Faculty of Business and Economics, Department of Accounting and Corporate Governance

Department, Centre or School

Department of Accounting and Corporate Governance

Year of Award


Principal Supervisor

Philomena Leung

Additional Supervisor 1

James Guthrie


Copyright Tri Jatmiko Wahyu Prabowo 2015. Copyright disclaimer:






1 online resource (xii, 247 pages)

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