Generally accepted accounting principles ("GAAP") of the People’s Republic of China ("PRC") come from a number of sources, majority of which represent the laws and regulations issued by the Ministry of Finance ("MOF"), and, listed company disclosures issued by the China Securities Regulatory Commission ("CSRC").| |
2. What is IFRS?|
International Financial Reporting Standards ("IFRS"), often known the original International Accounting Standards ("IAS"), are a set of accounting standards. They are issued by the International Accounting Standards Board ("IASB"), an independent, international organization supported by the professional accountancy bodies. The objective is to achieve uniformity and transparency in the accounting principles that are used by businesses and other organizations for financial reporting around the world.| |
3. What is US GAAP?|
US GAAP represents a set of accounting rules used to prepare financial statements for publicly traded companies and many private companies in the United States. In order to administer the sophisticated capital market over the past one hundred years, US GAAP has been developed to one of the most comprehensive GAAPs in the world and is still being updated very frequently.| |
4. What are the main differences between PRC GAAP, IFRS and US GAAP?⑴| Topic| PRC GAAP| IAS/IFRS| US GAAP|
General approach| Principle-based standards accompanied by detailed application guidance.| Principle-based standards with limited application guidance.| Same as IFRS| Ability to make accounting choice| Few choices.| Some accounting choices allowed.| Same as IFRS| Financial year end date| Required to be 31 December.| Not specified.| Same as IFRS| Complete set of financial statements| Balance sheet, income statement, equity statement, cash flow statement, statement of allowance for impairment, profit appropriation statement, statement segmental information, plus notes.| Balance sheet, income statement, equity statement, cash flow statement, plus notes.| Similar to IFRS| Classifications of assets in the balance sheet| Assets must be classified into current assets, long-term investments, fixed assets, intangible assets, and other assets.| Assets either are not classified or are classified into current and non-current.| Same as IFRS| Classifications of liabilities in the balance sheet| Liabilities must be classified into current and non-current.| Liabilities either are not classified or are classified into current and non-current.| Same as IFRS| Classification of expenses in the income statement| Classification by function| Classification by nature or by function.| Classification by function| Presentation of cash flows from operating activities| Must be presented using both direct method and indirect method.| May use either direct method or indirect method.| Same as IFRS| Classification of interest received and paid in the cash flow statement| Interest paid must be classified as a financing activity. Classification of interest received depends on its nature.| May be classified as an operating, investing, or financing activity.| Must be classified as operating cash flows.| Presentation of extraordinary items in the income statement| "Abnormal" items, such as loss from a natural disaster, etc., are presented as non-operating expenses or income in the income statement. Notes to disclose the nature are required if the amounts are material.| Rare, generally limited to expropriations, natural disasters, and acts of war.| Rare, negative goodwill is presented as an extraordinary item.| Non-mandated changes in accounting policy| Must restate prior financial statements unless impracticable.| May either restate prior financial statements or include as a cumulative effect in net profit and loss in the current financial statements.| Include effect in current year income statement. Disclose pro-forma...