China Accounting Standards
A New Beginning
This year 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). 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 new procedures which became law at the beginning of 2007, on January 1, have been 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. Deloitte Touche Tohmatsu, the professional services firm, had been providing consultancy services to the Chinese Ministry of Finance since 1993, giving advice on how best to implement a new accounting methodology, and how it would best suit the Chinese accounting system.
These consultations bore fruit on 15 February 2006, when the Ministry of Finance announced that they were to usher in a new era in Chinese accounting with the introduction of Accounting Standards for Business Enterprises, or ASBEs.
The ASBEs cover almost all of the major topics found in the International Financial Reporting Standards literature, albeit with some notable exceptions, and have been applicable to all listed Chinese companies since the beginning of the year. In the future, other firms are likely to be mandated to conform to the reformed standards in the MoF’s plans. Companies that are not listed are being strongly advised to adopt the new measures, or at least prepare in some part to make their finances more transparent and to international investment.