China is world's second largest economy. Over a period of liberalization Chinese accounting standards have shifted from a centrally control economy to an open market economy. But the developments of Chinese accounting standards have been highly influenced from the political environment of the country. Because of these constraints there are still major differences between Chinese accounting framework and FIRSs of International Accounting Standards (IAS).
In PRC, Ministry of Finance sets out accounting standards. These government-defined standards are often less value relevant as the government has its own political compunctions . This situation is again complicated due to weak capital market infrastructure.
The main areas where there is appreciable difference between PRC GAAP and IFRS includes the valuation of fixed assets over a period of time i.e. depreciation measurements and the amortization of intangible assets, the methods of accounting for income taxes, measuring goodwill and intangible assets, amortization of goodwill and intangible asset, mineral rights, the expenditure to explore develop and extract minerals, and research and development costs .
Though Ministry of Finance (MOF) of Peoples Republic of China is trying to fill in the gaps between Chinese GAAP and IFRS there are still many areas where these two accounting standards are differentiate ...Show more