Higher Order Ambisonics (HOA) represents a complete sound field in the vicinity of a sweet spot, independent of loudspeaker set-up. The high spatial resolution requires a high number of HOA coefficients. In the invention, dominant sound directions are estimated and the HOA signal representation is decomposed into dominant directional signals in time domain and related direction information, and an ambient component in HOA domain, followed by compression of the ambient component by reducing its order. The reduced-order ambient component is transformed to the spatial domain, and is perceptually coded together with the directional signals. At receiver side, the encoded directional signals and the order-reduced encoded ambient component are perceptually decompressed, the perceptually decompressed ambient signals are transformed to an HOA domain representation of reduced order, followed by order extension. The total HOA representation is recomposed from the directional signals, the corresponding direction information, and the original-order ambient HOA component.