Mainland-listed A shares should be encouraged to comply with new accounting requirements to make provisions for bad debts, inventories and investment, as they move towards internationalisation, according to Ernst & Young principal Alden Leung.
According to Accounting System for Joint Stock Companies , which is revised this year, H shares and B shares have to make provisions for bad debts, inventories and investment, but this is optional for A shares.
Mr Leung said that, because of this, only six out of 100 A-share firms had made provisions for stocks and bad debts in their interim results.
Mr Leung said that, as the firms served as pilot tests, it was imperative that Beijing encouraged them to adopt the practice before it could be launched across the country.
Under the old system, provisions for bad debts cannot surpass 0.5 per cent of the outstanding balance, a figure which is seen as unrealistic.
Companies are also not required to provide for the lower values of inventories and investment.