Abstract
This paper focuses on the application of IFRS standards in China. The research is mainly conducted on the basis of Kvaal and Nobes’s studies (2010) regarding the different ways that various countries apply IFRS and Nobes’s IFRS accounting classification system (2011). For companies that issued B shares, the use of IFRS in China lasted only until the 2006 ASBE (Accounting Standards for Business Enterprises) reform. The present study examines IFRS overt options in an attempt to 1) review the choices made by Chinese companies to discover – in light of the applicable PRC GAAP (Chinese Local Standards) requirement of that time – whether they were more or less likely to choose an option than the other countries analysed by Nobes & Kvaal; 2) rank China’s place within Nobes’s accounting classification system; and 3) rank China’ place, again in the Nobes’s model but also in light of a recent study based on BRICS (Note 1)countries (Sarquis, et al. 2014). The results of the statistical analysis confirm that Chinese financial statements display a “local” nature in their use of IFRS and that in its accounting tendencies, China belongs to the Continental European group rather than with the other BRICS countries.
Highlights
1.1 The Global Challenge of the AccountingThe aim of accounting—helping the users of accounting information to be aware and informed in their decisions—may be more broadly associated with fulfilling a need for information, in other words, helping others understand the meaning of a message that is sent and/or received, whether numerical or literal
This paper aims to contribute to the literature in three different ways: 1) It represents the first time that the IFRS policy options of Chinese companies listed on Mainland China’s Stock Exchanges have been reviewed on the basis of the local principles and compared with the choices made by other countries
The hypothesis within this study considers methodical behaviour from financial statement preparers as permitted by IFRS policy choice, that is, preserving those procedures and methods already known from their local GAAP and included in the IFRS policy
Summary
1.1 The Global Challenge of the AccountingThe aim of accounting—helping the users of accounting information to be aware and informed in their decisions—may be more broadly associated with fulfilling a need for information, in other words, helping others understand the meaning of a message that is sent and/or received, whether numerical or literal. The development of the world economies, their financial markets, and the creation and growth of groups of multinational companies have overcome geographical boundaries, but this process has failed to result in a consistent language This inconsistency is even greater in the area of economics and business and results in difficulties understanding the financial statements of companies under different jurisdictions despite an increasing need to compare economic-financial information. This situation is more dramatically felt by rapidly expanding economies Their rapid development, potentially combined with a deeply different or inadequate accounting culture, creates a barrier to those companies that would like to take up the challenge of internationalisation and to those foreign investors who are interested in investing in these countries (Note 2). These factors, briefly summarised, have led China, along with other hyper-developing countries, to thoroughly update its accounting system, while its socialist planned economy moved towards a socialist market economy
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