Abstract:

Micro Small Medium Enterprises (MSMEs) plays significant role in developing countries. However, there is dearth of research about the extent of Management Accounting Practices (MAPs) implemented in the sector. Our research is encouraged by positivistic study point of view that pointed out on detailed probe on actual practice since managerial accounting is an applied discipline. The purpose of this paper is to classify the maturity level of MAPs in Indonesian MSMEs using IFAC’s Management Accounting Evolution Model. The research design is exploratory in which data were collected through questionnaire with those responsible for MAPs in Indonesian MSMEs. Data analysis used descriptive statistic and hierarchical cluster analysis (Ward’s method) to classify firms according to IFAC’s model. This study found that MSMEs are most inclined to implement traditional MAPs (the ones in IFAC’s Stage 1 and 2) and least implement the modern MAPs in IFAC’s Stage 4. We also found 60% of Indonesian MSMEs are at its infancy in adopting MAPs (IFAC’s Stage 1 and 2) whereas the remaining is in the modern spectrum of IFAC’s Stage 3 and Stage 4. However, this study also highlights MAPs calibration done by MSMEs. We found that contrary to the theoretical framework and literature, a considerable number of MSMEs claim to have adopted a more mature Management Accounting stage (Stage 2) despite their low adoption of the fundamental one (Stage 1). We also found that firm characteristics like size of business did not explain the difference in MAP adoption. Our research finding provides delineation of MSMEs’ practices in managerial accounting and place their level according to IFAC’s evolution of MAP.