Hans Hoogervorst, Chairman of the International Accounting Standards Board (IASB), urges Indonesia that currently follows a gradual convergence process to fully embrace the International Financial Reporting Standards.
Hoogervost recently spoke at an international seminar on “IFRS Dynamics 2013 and Beyond: Impact to Indonesia” organised by the Indonesian Institute of Accountants (Ikatan Akuntan Indonesia, IAI)
Indonesia's approach to IFRS adoption is to maintain its national GAAP (Indonesian Financial Accounting Standards, IFAS) and converge it gradually with IFRSs as much as possible. Since 2012, the standards applied in Indonesia are based on those IFRSs that were effective at 1 January 2009. However, there is currently no plan (and consequently no timetable) for a full adoption of IFRSs.
In his speech, Hoogervorst outlined the benefits he sees for Indonesia if IFRSs are fully adopted. He described how Europe profited from adopting IFRSs and invited Indonesia to imagine the benefits that emerging economies could draw from the use of IFRS, especially economies that are so forcefully on the rise as Indonesia.
He adds: "For many emerging economies, adoption of IFRS has become an important statement of ambition – an international commitment to adhere to the highest possible standards of financial reporting."
However, Hoogervorst also warned that jurisdictions should embrace IFRSs fully and not stop half-way.
"It is important to understand that the full benefits of using the IFRS-brand can only be enjoyed if you adopt it fully," notes Hoogervost. "For foreign investors it is very difficult to discern small differences from big ones. If a jurisdiction cannot state that it has fully adopted IFRS, investors are likely to think that the differences are much bigger than they really are. If you have gone through all the trouble to adopt 95% of IFRSs, please make sure you also do the last 5%. Otherwise, you have all the pain of transition without the full gain of international recognition of that achievement."
Regarding fears of difficulties or problems with transition, Hoogervorst offered the IASB's assistance and pointed at the IASB's Asia-Oceania office in Tokyo and the Emerging Economies Group. He also mentioned the IASB's close cooperation with the Asian-Oceanian Standard-Setters Group, which he described to be likely represented in the Accounting Standards Advisory Forum the IFRS Foundation has set up to deepen the IASB's cooperation with standard-setters across the world.
Hoogervorst indicated that all of these initiatives offered excellent opportunities for a strong Indonesian participation in financial reporting and he concluded: "You have a wonderful opportunity to help shape the future of global financial reporting."