Accounting in Indonesia : a study of the ideological influences on western and Islamic accounting thought and practices
This study tries to document and review the ideological-environmental factors surrounding the conventional accounting concepts in the Western, with reference to the US, UK and the IASC's conceptual framework, and to examine the influence of such factors on accounting concepts. It is found that the conventional accounting concepts find their justification from the Western ideological-environmental system, including ideological, political, economic, legal, social, and cultural systems. Therefore, it is argued that the conventional accounting system would not be suitable for a different ideological-environmental system, such as an Islamic or Indonesian system. The study then examines ideological-environmental systems and concepts according to Islamic teaching (the Shari'ah) and according to the Indonesian ideology of Pancasila. Examining the conventional accounting concepts from the Islamic point of view, it is found that it is difficult to justify the adoption of the conventional accounting concepts. The study then suggests accounting concepts which better reflect Islamic values. The study also reveals that the environmental system and concepts according to Pancasila ideology are closer to the Islamic system and concepts, rather than to the Western ideological system and concepts. Therefore, it is suggested that Indonesia should reconsider the adoption of the Western (i.e. IASC) accounting system as the ideological logic underlying it is not appropriate in the Indonesian context. For this reason, and the increased demand for 'Islamic' accounting due to the blossoming of Islamic banks, financial institutions and insurance (takafol) as a result of the re-assertion of Islam in the political, economic and social spheres in Muslim societies, it is suggested that the development of accounting standards and knowledge in Indonesia be directed to the adoption of an 'Islamic' accounting system. A small survey has been conducted to find out the perceptions of Muslim 'accounting lecturers', as they are so far the main actors in the Indonesian accounting standards development, regarding the above issues. It was revealed that most of them believed that the accounting system is strongly influenced by its surrounding ideological-environmental systems. Most of them also believed that an Islamic ideological system and concepts would be significantly different from the Western ideological system and concepts, so that 'Islamic' accounting would also be different from the Western conventional accounting system and concepts. However, contrary to the belief that the Indonesian ideological systems and concepts are different from the Western, most of them still believed that the IASC's accounting concepts are acceptable. Recommendations are proposed to the authorities responsible for accounting education and accounting standards setters in order to increase the awareness among academicians, policy makers, and the society as a whole regarding the importance of having an accounting system which reflects the national ideology and philosophy.