Comparative Accounting System in Peoples Republic of China

by S1 AKUNTANSI NONREG B 2011

Ardilla Hasni, 8335116618 Fella Distiara, 8335116619 M Nur Fiqri Wicaksono, 8335118320 Ahmad Kamil, 8335118329

S1 AKUNTANSI FACULTY OF EKONOMI UNIVERSITAS NEGERI JAKARTA 2013

CONTENT

Acknowledgements Content Chapter I: Introduction 1.1 Background 1.2 Statement of The Problem 1.3 Purpose of the Study 1.4 Main Aim of the Paper 1.5 Methodology Chapter II: Discussion 2.1 Background 2.2 Accounting Profession 2.3 Accounting Regulation 2.4 Accounting Principles and Practies Chapter III: Conclution and Recommedation 3.1 Conclution 3.2 Recommedation References

CHAPTER I INTRODUCTION
1.1. Background In February 2006, the Ministry of Finance of the Peoples Republic of China (MOF) issued a new set of accounting standards, commonly known as New PRC GAAP. The issuance of New PRC GAAP represents a milestone in domestic economic development and the international convergence of accounting standards. New PRC GAAP has been adopted since 1 January 2007, with its application coverage gradually expanding. Within the next few years New PRC GAAP is expected to be adopted by all medium and largesized enterprises across Mainland China. The specific details of the latest dates for adoption are, or will be set out in rules issued or to be issued by the relevant regulatory authorities (e.g. local finance bureaux). This target will have a direct impact on those enterprises, including many foreign invested enterprises (FIEs) and private enterprises, which currently implement Accounting Regulations for Business Enterprises and related accounting standards (commonly referred to as Old PRC GAAP). Gaining an understanding of New PRC GAAP, and the extent to which it differs from Old PRC GAAP, will be an important part of a successful conversion. In addition, many FIEs generally prepare their group reporting packages under the accounting policies of their overseas parents as well as needing to prepare their PRC statutory financial statements. Since the accounting policies of their overseas parents may be in accordance with IFRS or other standards that have converged with IFRS, these enterprises will need to have a clear understanding of the relationship between New PRC GAAP and IFRS, before deciding on the extent to which they can adopt their group policies for the purposes of complying with New PRC GAAP. This publication provides a concise introduction to the composition and key features of New PRC GAAP, the major differences between Old and New PRC GAAP, and a number of issues that FIEs need to consider in order to meet the requirements under both New PRC GAAP and IFRS. The analysis of differences focuses on major items and differences that enterprises would generally encounter, and therefore excludes industry-specific items such as biological assets, insurance contracts and exploration/extraction of oil and gas. This publication is intended to assist executive and finance staff in comprehending the new standards and planning their conversion programme. However, as each entity is different, it is important that each conversion programme is tailored by comparing the entitys own existing internal accounting policies and procedures formulated under Old PRC GAAP with New PRC GAAP, in order to identify the differences in sufficient detail for the enterprise to determine the potential impact on their own financial reporting systems. It is also advisable to seek professional advice, for example where the finance staff have identified potential differences but are uncertain as to the correct treatment under New PRC GAAP. 1.2. Statement of The Problem The scope of the research to be conducted are limited to thefollowing :

1. 2. 3. 4.

Accounting Background in China Accounting Profession in China Accounting Regulation in China Accounting Principles and Practices in China

1.3. Purpose of The Study The purpose of this paper is divided into two, namely general purpose and special purpose: 1.3.1. General Porpose 1. Analyze Accounting Principles and Practices in China 2. Expected to increase knowledge of the readers 1.3.2 Special Purpose Fulfill International Accountings Assignment according to courses lecture contract Chapter 6: Comparative Accounting". 1.4. Main Aim of The Paper 1. As learning materials for students. 2. as a preliminary discourse to the preparation of the paper. 3. as literature to better understand the activities of accounting in China.

1.5. Methodology In the writing of this paper, the research methodology used is: a) Study of the library is to look for references of books related to the writing of this paper b) Internet browsing to look for some information on a search engine that the author didnt get of the books

CHAPTER II DISCUSSION

2.1 Background The Ultimate legislative authority in China rest with the national peoples congress, the highest organ of state power. It is elected for a term of five years and has the power to amend the constitution; make laws; select the president, vice president and other leading officials of the state; approve the national economic plan, the state budget and the final state account and decide on questions of war and peace. The state council is the highest organ of the state administration. It is composed of the premier, the vice premier, the state councilors, heads of ministries and commissions, the auditor general, and the secretary general With the formation of the peoples republic of China in 1949, the government adopted a policy of esthablishing a single public ownership economy with centralization management of business and control of all economic resources. By 1956, all private companies had been transformed into state or collective ownership. However, these state-owned enterprises (SOEs) eventually proved to be economic failures Restructuring the loss-making SOEs was a major part of the subsequent economic reform, which aimed at transforming the centrally planned economy into a socialist market economy, that is, a market economy based on socialist principles. the radikal economic changes implemented over the last decade have made China one of the fastest-growing and the largests economies, with annual economic growth rates among the hishest in the world. In terms of gross domestic product (GDP), China ranks fourth behind the United States, the European Union, and Japan Chinese companies were encouraged to raise funds on international capital markets as well as on the domestic one by issuing shares and bonds. The Government took steps to develop its domestic capital market. Shanghais municipal government approved the first securities regulation in China in 1984. Share dealing did not become popular until the beginning of the next decade, when the Shanghai stock exchange (SHSE) wa reactivated in December 1990 and a second stock exchange, Shenzhen stock exchange (SZSE), was established in April 1991. Companies in China issue four categories of shares 1. A shares, which can be owned only by Chines e citizens, and are traded on two stock exchange 2. B shares, which can be owned by foreigners 3. C shares, which are nontradable and held mainly by government and other SOEs

4. H shares, which can be owned only by foreigners and are traded in Hongkong 2.2 Accounting Profession Accounting in China has a long history. Its functioning in a stewardship role can be detected as far back as 2200 B.C. during the Hsiu Dynasty, and documents show that it was used to measure wealth and compare achievements among dukes and princes in the Xia Dynasty (2000 to 1500 B.C.).The young Confucius (551 to 479 B.C.) was a manager of warehouses and his writings mention that the job included proper accounting keeping the records of receipts and disbursements up-to-date. Among the teachings of Confucius is the imperative to keep history, and accounting records are viewed as part of that history. Until 1995 China had two professional accounting organizations. The Chinese Institute of Certified Public Accountants (CICPA), established in 1988 under the jurisdiction of the Ministry of Finance, regulated the audit of private sector enterprises.The Chinese Association of Certified Public Auditors (CACPA) was responsible for auditing state-owned enterprises and was under the authority of a separate organization, the State Audit Administration. In 1995 CICPA and CACPA merged, keeping the name of the CICPA. The CICPA sets the requirements for becoming a CPA, administers the CPA examination, develops auditing standards, and is responsible for the code of professional ethics.With the exception that the CICPA reports to a government agency, the regulation of public accounting practice in China may be compared to the system in the United States. Unlike United Stated, accounting and auditing in China took different paths in their development proceses. for many years, auditing firms mainly audited domestic companies, whereas accounting firm focused on companies using foreign investment. Accounting firms were sponsored by the ministry of finance (MoF), and auditing firm were under the state administration of audit (SAA), a department within the state council responsible for government audits. in 1991, the SAA, in competition with the CICPA, issued its Tentative rules on certified publics auditors to refulate auditors employed in audits firms. In 1992, the Chinese association of certified practicing auditors (CACPA) aws formed under the auspices of the SAA The competition between accountants and auditors with their own rules issued by different government department was confusing, particulary to international accounting firm. Consequently, steps were taken to merge the CICPA and CACPA. In 1993, the CPA Regulations were upgraded to become CPS law. As the result, the MoF was given the authority to regulate both the accounting and auditing firms. The CICPA became a member of the IASC in 1997. The merger between the CICPA ang the CACPA was completed in1998. 2.2.1 The practice of Hooking Up The practice of hooking up refers to an affiliate relationship between an accounting/auditing firm and its sponsoring organization, normally a government body. The hooking up relationship is rooted in the circumstances in which these professional accounting firms to affiliate themselves with a government agency or a government-run institute. Most

domestic professional accounting firms continued to have some government connection and truly independent private accounting firms are rarely seen in china. futher, some of clients of these organization are themselves directly or indirectly related to the hooked organization because of complex ownership and control arrangements 2.2.2 Guanxi Guanxi refers to connection or tight, close-knit networks. It can be considered an important feature of Chinese business culture. with guanxi, it is possible to accomplish almost anything, but, without it, life is likely to be series of long lines and tightly closed doors and maze of administrative and bureaucratic hassles The prevalence of guanxi may be contributing to the large-scale corruption in china. under its influence, guanxi-related considerations often prevail over ethics related considerations in accounting and auditing practice. Accountant and financial managers often have to use guanxi to do business with business patners or government officials in a way that is in violation of their professional ethics 2.3 Accounting Regulation The government continues to act as the accounting regulator in order to retain political control. It issues IFRS-based accounting standarts mainly to meet external pressures but retain a UAS-based approach in parallel as a means of detailed regulary control In recent years, accounting regulation in C hina has been influence mainly by chinas desire to harmonize domestic accounting practice, harmonize Chinese accounting with IFRS and meet the requirements of economic reform. As new form of business emerged, they created a need for international accounting harmonization. this prompted the MoF to issue pronouncement to achieve it The Accounting Law was amended in 1993 and 1999, and covers all enterprises and organizations including those not owned or controlled by the state. It outlines the general principles of accounting and defines the role of the government and the matters that require accounting procedures. The Ministry of Finance formulates accounting and auditing standards. This agency is supervised by the State Council, an executive body corresponding to a cabinet. Besides accounting and auditing matters, the ministry is responsible for a wide range of activities affecting the economy. Generally, these activities include formulating long-term economic strategies and setting the priorities for the allocation of government funds. More specifically, the ministrys responsibilities include: Formulating and enforcing economic, tax, and other finance-related policies Preparing the annual state budget and fiscal report Managing state revenue and expenditure Developing the financial management and tax system Accounting and auditing matters fall into the last category. In 1992 the Ministry of Finance issued Accounting Standards for Business Enterprises (ASBE), a conceptual framework

designed to guide the development of new accounting standards.These standards will eventually harmonize domestic practices and harmonize Chinese practices with international practices. Effective on July 1, 1993, the ASBE is a landmark event in Chinas move to a market economy. Before the ASBE, more than 40 different uniform accounting systems were in use, varying across industries and types of ownership. Even though each one of these may individually be labeled as uniform, they resulted in inconsistent practices overall.Thus, one motive for issuing the ASBE was to harmonize domestic accounting practices. Moreover, existing practices were incompatible with international practices and unsuited for a market-oriented economy. Harmonizing Chinese accounting to international practices serves to remove barriers of communication with foreign investors and helps meet the needs of the economic reforms already under way. After the issuance of the ASBE, the Ministry of Finance replaced the more than 40 uniform accounting systems mentioned previously with thirteen industry-based and two ownership-based accounting systems, as listed in These systems are viewed as transitional until specific accounting standards can be promulgated that will apply to all enterprises operating in China. The China Accounting Standards Committee (CASC) was established in 1998 as the authoritative body within the Ministry of Finance responsible for developing accounting standards. The standard-setting process includes assigning necessary research to task forces, the issuance of exposure drafts, and public hearings. CASC members are experts drawn from academia, accounting firms, government, professional accounting associations, and other key groups concerned with the development of accounting in China. To date, the CASC has issued 10 accounting standards on issues such as cash flow statements, debt restructuring, revenue, nonmonetary transactions, and contingencies. The China Securities Regulatory Commission (CSRC) regulates Chinas two stock exchanges: Shanghai, which opened in 1990, and Shenzhen, which opened in 1991. It sets regulatory guidelines, formulates and enforces market rules, and authorizes initial public offers and new shares.The CSRC also issues additional disclosure requirements for listed companies. Thus, disclosure requirements for listed companies are established by two government bodies, the Ministry of Finance and the CRSC. Accounting standards for business interprise:
Orientation

A uniform accounting system conforming to international standards designed to meet the needs of Chinas socialist market economy. These standards are incorporated into law. The accrual basis, the concept of consistency, the matching of revenue and expenses and the quality of objectivity are all required by the standards. Assets

 The use of historical cost for assets is specified and a clear distinction between revenue expenditures and capital expenditures must be made. Assets should be classified into current and noncurrent categories. Inventories may be valued using most conventional methods, including LIFO. Fixed assets may be depreciated using the straight -line or the activity method. If the enterprise receives approval, accelerated depreciation may be used. Intangible assets, including goodwill, are recognized and are to be amortized over the period benefited. Liabilities Liabilities should be classified as current or long -term. Equity Equity is classified into invested capital, capital reserve, surplus reserve, and undistributed profit. Invested capital represents the face value of stock issued and government investment. Capital reserve represents stock premium, asset revaluation increments, donated capital, etc. Surplus reserve is analogous to appropriated retained earnings, and undistributed profit is analogous to unappropriated retained earnings. Revenue/Expense/Profit Revenues are determined using the accrual basis including the completed contract and percentage-of-completion methods for long-term projects. Expenses are determined using the accrual basis and actual costs incurred. Enterprises using standard or estimated costs must adjust variances to actual at the end of the current month. The plan for distribution of profits mu st be shown in the income statement or the notes to the financial statements. Financial Reporting and Disclosure Required reports consist of a balance sheet, an income statement, a statement of changes in financial position (or cash flow statement), supporting schedules, notes, and explanatory statements. Comparative financial statements are required. Consolidated financial statements are required in cases of 50% or more ownership except for enterprises not suitable for consolidation. Notes to financial statements must disclose accounting methods adopted, changes in accounting methods, descriptions of unusual items, and other details and explanations Accounting System in China: Industry-Based Systems Industrial Enterprise Accounting System

 Commercial Enterprise Accounting System Transportation Enterprise Accounting System Transportation (Railways) Enterprise Accounting System Transportation (Aviation) Enterprise Accounting System Transportation (Postal Services and Telecommunication) Enterprise Accounting System Hospitality Enterprise Accounting System Construction Enterprise Accounting System Real Estate Development Enterprise Accounting System Agricultural Enterprise Accounting System Financial Institution Accounting System Insurance Enterprise Accounting System Foreign Economic Cooperative Enterprise Accounting system Ownership-Based Systems Foreign Investment Enterprise Accounting System Limited Stock Companies Accounting System

2.4 Accounting Principles and Practies In the prereform period the aim of the accounting system in China was to help the government plan its economic activities and manage the various government funds, and it was therefore called fund accounting system. All accounting bodies and pers onnel were closely linked with the government at the central or the local level, and there were no independent accountants and independent accounting institutions. Chinas accounting system was completely closed to the outside world. The reliance on UASs is reinforced because many Chinese accountants and auditors lacked professional education and training. It was also supported by the Chinese culture. With the economic reform and opening up, Chinese enterprises began to operate independently, foreign company moved in, and a stock market emerged. All these developments required fundamental changes in the accounting system. The reform of the system gained momentum in the 1990s, following the establishment of the two stock exchanges. However, although the capital market has played an important role in accounting standard in China, its continued structural weakness and significant imperfections have seriously restricted the supply of, and demand for, decision-useful accounting information and IAS-type accounting standards. State ownership is present in more than 90 percent listed companies and the government remains an important influence on corporate governance by way of personnel control and resource allocation. Consequently the government is regarded as the main user of accounting information. China is an economy in transition, and its market-based systems are still at an early stage of development. Traditionally in China, there has been a close link between taxation and accounting, and the calculation of taxable income has been a major purpose of accounting.

Further, under Chinas communist ideological influences, accounting conversation has long been criticized as a tool used to manipulate accounting numbers and maximize the profits of capitalists in exploiting workers. Accounting conservatism is the principle that stipulates that, the one that produces lower current amounts for net income and net assets ought to be chosen. This accounting conservation has virtually been prohibited in China since 1940. A lack of conservatism in Chinese accounting standards and practices continues to be a major difference between Chinese GAAP and IFRS. The financial statements published by Chinese companies typically include a balance sheet, an income statement, a cash flow statement, notes to financial statements, and other supporting schedules. One of the major problems associated with accounting practices adopted by enterprises in China is a lack of coherent interpretation of the relevant requirements. As a result, the formal harmonization of accounting and auditing standards that has occurred within China has not brought about a harmonization of accounting practices. China, being a transitional economy, is only beginning to develop the infrastructure required to support credible financial reporting. As China intensifies its integration into the global economy and fulfills its obligations agreed on the WTO accession treaty. The conceptual framework, first issued in 1992, has since been superseded by 16 Chinese Accounting Standards and other regulations, such as the Accounting System for Business Enterprises (ASBE) issued in 2001. The ASBE aims, among other things, to enhance comparability of financial information, separate accounting and taxation treatments, and ensure harmonization with internationally accepted accounting practices. The ASBE defines fundamental principles (going concern, accounting period, substance over form, consistency, timeliness, understandability, accrual basis, matching, impairment recognition, materiality, and measurement currency vs. presentation currency) and financial statement (assets, liabilities, owners equity, revenues, expenses, and profits), which are similar to those found in IFRS. It also specifies the contents of financial reports minimum notes to the financial statement, and how soon after the end of the accounting period reports should be published. The ASBE also includes: 1. Classification within assets, liability, and equity elements, as well as recognition and measurement principles for a wide variety of assets and liabilities. 2. Revenue recognition principles for goods, services, royalties, and interest. 3. Expense recognition principles for bad debts, cost of goods sold, depreciation, major overheads, and impairment of assets. 4. Accounting principles for nonmonetary transactions, assets contributed by investors, and accounting for income taxes. 5. Principles for consolidated financial statement and accounting for investment in joint ventures. Its requirement to include management discussion of financial condition is similar to requirements in United States. Further, with economic reforms, a new auditing system has

emerged under which the purpose of auditing has changed from ascertaining a compa nys tax liabilities to ascertaining the truthfulness and fairness of a companys financial statements. Currently most companies in China are subject to annual audit carried by certified public accounting firms registered in China. The ASBE and Chinese accounting together form the structure of financial reporting in modern China. Since 1978 china has introduced measures to reform its accounting system, which is now converging with standard accounting practices in mature market economies. Nevertheless, significant differences remain with respect to those practices and the accounting institutional environment between China and mature market economies. Chinese accounting practices differ in some respects from those required under IFRS. In some areas covered by IFRS, there are no specific rules in China. In other area, transactions are treated differently under the two sets of rules. Several Chinese companies provide financial statements prepared in accordance with both Chinese (PRC) GAAP and IFRS. The differences between Chinese GAAP and IFRS, there are no specific rules in the area business of combinations (IAS 22), Impairment of assets particularly (expect investment) diminutions in value are not allowed (IAS 36), the definition of operating and finance leases (IAS 17), employee benefits obligations (IAS 19), Accounting for an issuers financial instruments (IAS 32). There are no specific rules requiring disclosures of discontinuing operations (IAS 35), segment liabilities (IAS 14), or diluted earnings per share (IAS 33). The methods of treating certain transactions are different from those required under IFRS. Below provides an excerpt from Sinopec Shanghai Petrochemical Company Ltds 2009 annual report, in which company describes major differences between PRC GAAP and IFRS and quantifies the effects of these differences on net income and stockholders equity. Major Differences Between The audited Financial Statements Prepared under ASBE and IFRS 1) Analysis of the effects of major differences the net profit under ASBE and IFRS For the years ended 31 December 2009 2008 RMB RMB Millions Millions 64,000 24,871 30 462 (8) 64,484 30 61 (6) 24,956

Net profit under ASBE Adjustments: Revaluation of land use rights Government grants Tax effect of the above adjustments Profit for the year under IFRS

2) Analysis of the effects of major differences the shareholders equity under ASBE and IFRS At 31 December 2009 2008 RMB RMB Millions Millions Shareholders' equity under ASBE. Adjustments: Revaluation of land use right Government grants Tax effect of the above adjustments Total equity under IFRS 400,585 (982) (1,042) 292 398,853 350,166 (1,012) (912) 300 348,542

The unique features in the Chinese environment include the following: 1. Civil litigation is very rare and thus CSRC is the prime discipliner of firms and their managements. 2. In the ownership structure of listed firms, block holders are usually the sate and quasistate institution such as SOEs. 3. The dynamics in Chinese boardrooms are likely to be different from those of their counterparts in Anglo-American countries. 4. Auditing profession in China is relatively new and it has faced a steep learning curve. 5. State ownership still has an important influence on the organization and development of accounting standards. 6. Wholly foreign-owned multinational corporations competing against weaker and smaller domestic firms are becoming a major concern. 7. Chinese regulators view harmonization between Chinese GAAP and IFRS as a two-way process that should permit differences and local innovation. 8. The capital market in China is controlled by government. It characterized by weak equity outsiders, strong market speculation, weak form efficiency, extensive earnings management and deceptive reporting, and large market manipulation.
Different between chinese GAAP and IFRS Issue IFRS Profit or loss on disposal of fixed IAS 16 Include in operating asset profit or loss

Chinese GAAP Presented as nonoperation gain or loss

Requirement to provide segment information Measurement of property, plant, and equipment Borrowing cost related to self use assets that take a substantial time to complete

IAS 14 Listed companies only IAS 16 May use either fair value or historical cost IAS 23 May either capitalize as part of the asset's cost or charge to expense IAS 36 An asset is impaired when its book value exceeds its recoverable amount, which is the greater of net realizable value and the net cash flow expected to arise from continued use of the asset IAS 38 Expense all research cost. Capitalize development cost if certain criteria are met IAS 38 Charged to expenses when incurred

Listed companies and others interprise applying the system Generally required to use historical cost Must capitalize as part of the asset's cost

Impairment of assets that do not generate cash flows individually

Specific gurdance is not provided

Research and development cost

Expense all research and development cost (except patent regristationa and legal cost, which are capitalize) Deffered until the entity begins operation, then, charged to expenses Accounted for as a purchased intangibel asset until the construction or development commences, then accounted for as fixed assets under construction or development is complete, on completion, total cost are transferred to property held for use Amortized over the shorter of the estimated useful life and the contractual or legal life, if no contractual or legal life, amortize over the estimated useful life, but not more than 10 years Prohibited

Preoperating expense

Land use rights

IAS 38 Accounted for as an operating lease. Cost of land use rights is trearted as prepaid lease payment

Amortization of intangible assets

IAS 38 Amortize over the estimated useful life, which is presumed to be 20 years or less

Revaluation of intangible assets

IAS 38 Permitted only if, the intangible asset trades in an active market

Due to unique features in the Chinese cultural, economic, and political contexts, Chinese regulators seem to view harmonization between Chinese GAAP and IFRS as a two-way process that should permit differences and local innovation. The Chinese government has been active in developing accounting standards due to self motivation and external pressure. However, it has

retained a uniform accounting system in the Enterprise Accounting System issued in 2000 to accommodate the special circumstances of transforming government, strong state ownership, a weak accounting profession, a weak equity market, and inertial effect of accounting tradition and cultural factors.

Chapter III CONCLUSION AND RECOMMENDATIONS

3.1 Conclusion Accounting rules and practices between countries differ more for individual companies than for groups, as illustrated particularly by nancial statement formatsand accounting principles, and for China we conclude that: 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 were 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 did not include an accounting of the debts that a corporation holds, and were less suitable for management control than for accounting for tax purposes. This system of accounting was widely considered to be unsuitable for managing corporations in a market economy. In 2006, the Chinese government introduced a revised accounting law. This was the fruit of considerable discussion and protracted debate, involving the Ministry of Finance, members of the International Accounting Standards Board and representatives of some Chinese firms. This revised law marked a large step forward for the continuing integration of world trade and capital markets, with China adopting a significant number of the accounting standards laid out by the International Accounting Standards Board (IASB). The old Chinese Accounting Standards (CAS) were largely replaced by the International Financial Reporting Standards (IFRS), to bring China more in line with the rest of the world. The similarity between the new Chinese accounting standards and the IFRS is almost 9095%. 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. Chinas transformation from a planned economy into a market economy has led to an increase in foreign direct investment (FDI), development of a vibrant securities market (in Shanghai and Shenzhen), economic integration of the Special Administrative Regions, and, in recent years, an increase in both outbound and inbound M&A activity. These developments have a created a pressing need to reform the old accounting standards into a modern system that takes into account a wider range of stakeholders. The accounting standards, and the laws and regulations related to accounting have thus regularly been changed in an effort to converge toward international standards; foreign investors must take notice of the rapidly changing regulatory environment to ensure compliance and optimize their tax strategy.

Despite substantial convergence between Chinese Accounting Standards (CAS) and the International Financial Reporting Standards (IFRS), practical implementation and interpretation differences remain. Recently, however, the PRC accounting framework has adopted a more principles-based trend that is in line with international standards. 3.2 a. b. c. d. Recommendation Creditor protection in China to be repaired. Accounting systems in China have done well. China state governments can develop an accounting systems again. Companies located in China can support the China accounting system.

References

Doupnik, Timothy and Perera, Hector. International Accounting 3rd Edition. Singapure: 2012.
http://www.china-briefing.com/news/2013/02/05/china-gaap-vs-u-s-gaap-and-ifrs.html