- •Introduction
- •Relationship between Business and Providers of Capital
- •Political and Economic Ties with Other Countries
- •Inflation Accounting
- •Level of Development
- •Culture
- •Accounting Clusters
- •Consequences of the Lack of Comparability
- •International Standards
- •Consolidated Financial Statements
- •Currency Translation
- •The Current Rate Method
- •The Temporal Method
- •Current us Practice
- •Exchange Rate Changes and Control Systems
- •The Lessard - Lorange Model
- •Transfer Pricing and Control Systems
- •Separation of Subsidiary and Manager Performance
- •In the meantime, current Chinese accounting principles, present difficult problems for Western firms. For
- •Case Discussion Questions
In the meantime, current Chinese accounting principles, present difficult problems for Western firms. For
example, the former Chinese accounting system didn't need to accrue unrealized losses. In an economy where shortages were the norm, if a state-owned company didn't sell its inventory right away, it could store it and use it for some other purpose later. Similarly, accounting principles assumed the state always paid its debts--eventually. Thus, Chinese enterprises don't generally provide for lower-of-cost or market inventory adjustments or the creation of allowance for bad debts, both of which are standard practices in the West.
http://china-window.com/window.html
Source: L. E. Graham and A. H. Carley, "When East Meets West,"Financial Executive, July/August 1995, pp. 40 - 45, and K. Theonnes and A. Yeung, "Playing Favorites," Financial Executive, July/August 1995, pp. 46 - 51.
Case Discussion Questions
What factors have shaped the accounting system currently in use in China?
What problems does the accounting system currently in use in China present to foreign investors in joint ventures with Chinese companies?
If the evolving Chinese system does not adhere to IASC standards, but instead to standards that the Chinese government deems appropriate to China's "special situation," how might this affect foreign firms with operations in China?