Chinese Gaap and Ifrs

International Accounting

China GAAP and IFRS

Over the last few decades China has made many changes to their accounting standards as they were faced with many problems in the past. During a tough transition to IFRS China has overcome many issues pertaining to the convergence, but they have also made a lot of progress. This paper will talk about the background of China and their accounting history. In addition we will discuss the reasons for convergence, the differences between China GAAP and IFRS, the drivers of convergence, and issues with the process as a whole.

History

Accounting’s history is Chinese culture can date back as 2200 BC in the Hsui Dynasty when the stewardship function of accounting was emphasized. Later in the Xia Dynasty, several hundred years later, the concept of measuring wealth and accomplishment was introduced. Accounting for business was frowned upon and thought of as a weak profession in China during these times. A master apprentice system was used up until the 1900’s to train accountants when the Chinese realized the importance of accounting. The first local professional body which was established in 1925 was called the Chinese Chartered Accountants’ Society of Shanghai. The number of accountants in China began to increase at an alarming rate and by 1947 there were 2619 certified accountants in China. Accountants were continuously despised until the 1980’s partly due to the Chinese culture. Chinese accounting standards (CAS) originated during a socialist period in which accounting was used as inventory of assets available to a company as opposed to a tool of profits and losses. Corporations in China are state-owned which means a legal entity is created by the government to undertake commercial activities on behalf of an owner government. Serious attempts to align China’s accounting system with international practices started in 1979 when a set of accounting regulations was prepared for joint ventures with foreign investments....