- Chinese accounting standards
Chinese accounting standards are the accounting rules used in Chinese state-owned corporations in mainland China. They are currently being phased out in favour of generally accepted accounting principles or International Accounting Standards.
As of February 2010, the Chinese accounting standard systems is composed of Basic Standard, 38 specific standards and application guidance.
Chinese accounting standards are unique because they originated in a socialist period in which the state was the sole owner of industry. Therefore unlike Western accounting standards, they are less a tool of profit and loss, but an inventory of assets available to a company. In contrast to a Western balance sheet, Chinese accounting standards do not include an accounting of the debts that a corporation holds, and are less suitable for management control than for accounting for tax purposes.
This system of accounting is widely considered to be unsuitable for managing corporations in a market economy. As a result, Chinese corporations are gradually moving toward International Financial Reporting Standards. This has proven to be a massive undertaking. As a consequence Chinese companies who offer shares for sale in the United States used to be required to prepare three sets of statements, one using Chinese accounting standards (China GAAP), one using international standards (IFRS), and one using North American GAAP standards (US GAAP). However, since 2008 the U.S. Securities and Exchange Commission (SEC) allows foreign private issuers to use financial statements prepared in accordance with IFRS.
However, in recent years, The Finance Department of Chinese Government has issued new Chinese Accounting Standards which converge into IFRS and the similarity is almost 90–95%. The translation cost has been reduced greatly because of this measure.
- ^ Acceptance From Foreign Private Issuers of Financial Statements Prepared in Accordance With International Financial Reporting Standards Without Reconciliation to U.S. GAAP, Securities Act Release No. 33-8879, Exchange Act Release No. 34-57026 (Dec. 21, 2007) available at http://www.sec.gov/rules/final/2007/33-8879.pdf
Presentation by Director-General of Accounting Regulatory Department, Ministry of Finance, February 8, 2010 http://ec.europa.eu/internal_market/accounting/docs/conference20100208/presentation-liu_en.pdf
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