The implementation of accrual basis accounting by Indonesia’s local governments

ABSTRACT

To examine the implementation of accrual basis accounting by local governments in Indonesia following its mandatory introduction by Government Regulation (GR) Number 71 of 2010, we identify key actors in the process. Local governments earn either a ‘qualified opinion’ or an ‘unqualified opinion’ in audited financial report. They all state that the implementation of the accrual basis accounting in their governments is limited to the production of accrual accounting reports only. The process itself is not accrual-based, even four years after its mandatory implementation. Technical issues, such as imprecise valuations and shortages of qualified staff, plague governments regardless of their qualified or unqualified rating. Given that only 16 officials from nine local governments are interviewed and given that neither BPK auditors nor the local auditors are interviewed on the progress made by local governments in implementing the accrual basis accounting, the results of this study cannot be generalized. Indonesia joins other countries in accepting accrual basis accounting. Little or no research looks at the progress since 2015. We do that, and we compare the progress made by the governments earning unqualified opinion rating with that made by the governments earning qualified opinion.

KEYWORDS:

• Accrual accounting
• local government
• implementation development
• qualified opinion
• unqualified opinion

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Acknowledgments

Authors thank to Universitas Prasetiya Mulya and University of Lampung for the support during the research process. We also thank to all respondents from several local governments for cooperation in the survey.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This research was fully funded by DIKTI Grant 2018 for Inter-University Collaboration Research Scheme (PTKP) of Ministry of Research, Technologies, and Higher Education, Indonesia, No: 0/3/10.4/720/03/2018.

Notes on contributors

Retno Yuliati

Retno Yuliati is a lecture in Accounting, School of Business and Economics, Universitas Prasetiya Mulya, Tangerang, Indonesia. Her research interests include public sector accounting and accounting education. Retno Yuliati is the corresponding author for this paper and can be contacted at: [email protected].

Yuliansyah Yuliansyah

Yuliansyah Yuliansyah is a senior lecturer in Accounting, School of Business and Economics, University of Lampung, Bandar Lampung, Indonesia. Yuliansyah completed his PhD in accounting at the University of South Australia, Australia, in 2012. His areas of research interest include strategic management accounting, management control system and strategy, and performance measurement systems. He has published in several international academic journals and presented his research paper at reputed international conference. Email: [email protected].

Yang Elvi Adelina

Yang Elvi Adelina is a lecture in Accounting, School of Business and Economics, Universitas Prasetiya Mulya, Tangerang, Indonesia. Her research activity is focused on Islamic banking and risk management. Email: [email protected].