China accounting standards - Essay Example

The accounting standards determine the procedure for preparation of financial statements which produces information like business revenues, expenditure, net income, assets, liabilities and the wealth of the stakeholders. Overview: Chinese Accounting standards China has its own system of accounting standards that is maintained in the land of China. The accounting standards of China are composed basic standards, specific standards and application guidance. There are thirty-eight specific standards that are followed in the Chinese accounting standards.

During the socialist period, the government of China was the sole owner of the industry. The accounting standards of China are unique as it developed during the socialist regime and is tailor made to the objectives of the Chinese economy. The Chinese accounting standards are intended to focus less on the information of profit and loss. The accounting standards differ from the western accounting standards in terms of providing guideline on information on inventory of the industries. In comparison to the western accounting standards, the Chinese accounting standards are intended less towards accounting of debt of a corporation (Coulaud, Schulz and Debilliers, 2008). . Moreover, the Chinese economy underwent reforms and achieved rapid progress in industrial development.

This created the need of revising the accounting standards of China in order to create a competitive ground with the international accounting standards. In 2006, the government of China passed a new accounting law in joint consultation with the ministry of finance, the international accounting standards committee and the representative from the Chinese economy. With a view towards the emerging scenario of integration of international trade with the Chinese trade, the accounting standards of China adopted several standards recommended by the International accounting standards board.

In order to align the information on the business performance of China through financial statements and reports and to allow a platform for comparison of the Chinese business with the top listed companies all over the world, the accounting standards of China adopted several features of the international accounting standards. The financial reporting procedure was replaced by the international financial reporting standards. The financial reporting criteria helped to compare the financial statements of the Chinese company with the rest of the world which added a significant feature in the era of globalization (Avery, Zhu and Cai, 2009).

The alignment of the financial reporting standards adopted by China to the International accounting standards is about 95%. Impacts of changes in Chinese accounting standards The changes in the accounting standards of China for preparation of financial statements and accounts have created major impacts on the ways on financial accounting and generating annual reports of the Chinese companies. His has also paved the path of