International accounting in china - Essay Example

1990 was a watershed year wherein the PRC laid out the basic general objectives for the accounting system reform which consisted of the fundamental and specific accounting standards against the background of the international accounting practices catering to the nation's requirements. (Accounting and Auditing Standards) The approach had the inclusion of a two-pronged one that had involved the makeover to an accounting system driven by market-economy from the existing planned economy accounting system.

The first step led to the formation of the International Accounting Standard -- IAS based Basic Accounting Standards in the year 1992. This apart, a fresh package of uniform accounting system was being released for the purpose of the vital economic sectors. The second step will have a complete system of accounting standards which meant for businesses which would be built over the process of time bringing the Chinese accounting system on the similar lines along with the global practices. The espousing of the Basic Accounting Standard in the year 1992 standardised the financial operations of all businesses, public enterprises, as well as governmental bodies and dealt with several issues and problems connected with the old system.

(Accounting and Auditing Standards) Background of China's economy (1980 to date: market economy): The year 1980 had set the conditions for the "Second Revolution" that marked the starting of the reforms in every arena of the Chinese society by the leaders who had ruled the country after Mao Zedong. The leadership of the PRC had turned over to economic reforms as the main instrument in order to realize the extensive objective of the conditions of modernizations in four principal sectors such as industry, agriculture, science and technology and defence and to make the nation join into the group of advanced industrial countries by the beginning of the new millennium.

This reform approach was initiated during the 1980s and it has been credited generally to the initiatives as well as single-mindedness of the stalwart Deng Xiaoping, who was the most important leader in China after Mao Zedong under whose leadership had brought about comprehensive economic modernization as well as organizational reforms program. The progress of the industrial sector in China was being marked by the large-scale movement of the population towards the urban areas. The population had crossed over 1 billion by the year 1982 with an annual growth rate of about 1.4%. (The People's Republic of China V: Reforms, 1980-88) With the passage of time, overseas experts were being called in for a helping hand in the process of modernization and the JVs with foreign capitalists and the MNCs had increased.

However the growth as well as the successful harnessing of the technological skills, which is the main crux of the Four Modernisation had required the necessity of huge investment and further needed extra labour by the Chinese people. In a partial departure from the goal of 'self-reliance', China started taking