Development in China
ACCOUNTING IN CHINA
1. Introduction • China’s rapid economic growth in the past two decades has amazed the rest of the world. • With China’s accession to the WTO, business activities with and within China will further expand. • China fully understands that a sound financial reporting system plays a key role in the process of economic development. • The Chinese Ministry of Finance (MoF), who has the responsibility for regulating accounting matters in China, has set itself the objectives of fostering investors’ confidence in financial information, increase transparency of financial reporting, and harmonize with International Financial Reporting Standards (IFRS), so as to reduce the costs of raising capital by enterprises and alleviate the risk of financial crisis.
2. History Of Development • The old accounting and regulations were designed to meet the needs of a planned economy, and therefore focused on whether the production goals of state-owned enterprises and their financial and costs plans were being met. • Accordingly, the objectives of accounting and performance measurement some twenty years ago were significantly different from the financial reporting objectives in a modern market oriented economy. • Significant accounting reforms were undertaken in the past two decades due to several factors such as: ➢ Since China opened its door to foreign investments in 1979, the rapid growth of its economy, international trade and securities markets has shaped new objectives for financial reporting. ➢ State-owned enterprises now look a lot like profit-oriented businesses, and managers and other users need reliable and relevant financial information on which to base decisions about the efficient allocation of capital. ➢ At the same time, china has reached out to the international community to form joint ventures and gain greater access to the latest technologies and the world’s capital markets. • In
1. Introduction • China’s rapid economic growth in the past two decades has amazed the rest of the world. • With China’s accession to the WTO, business activities with and within China will further expand. • China fully understands that a sound financial reporting system plays a key role in the process of economic development. • The Chinese Ministry of Finance (MoF), who has the responsibility for regulating accounting matters in China, has set itself the objectives of fostering investors’ confidence in financial information, increase transparency of financial reporting, and harmonize with International Financial Reporting Standards (IFRS), so as to reduce the costs of raising capital by enterprises and alleviate the risk of financial crisis.
2. History Of Development • The old accounting and regulations were designed to meet the needs of a planned economy, and therefore focused on whether the production goals of state-owned enterprises and their financial and costs plans were being met. • Accordingly, the objectives of accounting and performance measurement some twenty years ago were significantly different from the financial reporting objectives in a modern market oriented economy. • Significant accounting reforms were undertaken in the past two decades due to several factors such as: ➢ Since China opened its door to foreign investments in 1979, the rapid growth of its economy, international trade and securities markets has shaped new objectives for financial reporting. ➢ State-owned enterprises now look a lot like profit-oriented businesses, and managers and other users need reliable and relevant financial information on which to base decisions about the efficient allocation of capital. ➢ At the same time, china has reached out to the international community to form joint ventures and gain greater access to the latest technologies and the world’s capital markets. • In