China Accounting Standards, Springers 2016 - by Lorenzo Riccardi

Introduction and Effects of New Chinese Accounting Standards for Business Enterprises

This book provides an exhaustive overview of China’s accounting standards and makes a clear comparison between Chinese and international accounting systems. It offers an essential guide to dealing with new accounting standards for business enterprises in China. The guide provides valuable support to accountants and professionals when comparing the new standards adopted in China with the corresponding principles under IAS/IFRS and appraising potential outcomes. The comparative approach together with comments and easy-to-use numerical examples allow readers to quickly grasp these accounting systems.

The process of increasing economic openness and liberalization has been particularly prevalent in the past decade. Recently, this process has been making China increasingly integrated into the world economy. Perspectives are changing and a growing extent of investors are demanding financial statements; this demonstrates a higher level of transparency, objectivity and accuracy, particularly in mainland China. Keeping up to date with international accounting standards is crucial in order to meet increasingly demanding global requirements. In fact, the process of harmonization and integration of reporting standards can bring a twofold advantage. First, it provides transparency and promotes confidence among foreign investors, the major aim of latest Chinese economic policies. Second, an internationally integrated system makes it easier for companies to raise capital and it reduces the risk of financial crisis.

At first glance, the major changes introduced by new principles embrace a set of basic standards which are now more in line with IFRSs. First, in accordance with international standards, new ASBEs reintroduce the generally agreed definition of assets and liabilities. In all cases, accounting elements shall be recognized only when their definition is made and the established recognition conditions are satisfied. Some other main features have been introduced: first the definition of “gains” and “losses” and second the method of historical cost as general requirement when measuring accounting elements. Deviations from the latter provision are replacement cost, net realizable value and fair value which can be adopted in the case of reliable determination.

Although new principles have affected firms to a different extent, analysts argue Chinese companies under new ASBEs to be benefited mostly in terms of comparability. This point could lead in turn to an increased level of volatility of financial results due to the greater use of fair value principle. Both differences in adoptions of standards and increased volatility in end-year results should be explained in financial statement and disclosure to stakeholders.

Hardcover: 337 pages

Publisher: Springer; 1st ed. 2016 edition (November 9, 2015)

Language: English

ISBN-10: 9811000042

ISBN-13: 978-9811000041