CHINA'S ACCOUNTING practices and the requirements for shareholder disclosure by mainland companies are being brought steadily into line with global standards.
The Ministry of Finance has sought advice from major firms such as Deloitte Touche Tohmatsu on how best to develop the domestic accounting sector. It has basically decided to follow the recognised International Financial Reporting Standards (IFRS) system.
'We looked at best practices around the world, but now the new standards are very much IFRS,' said Stephen Taylor, a partner with Deloitte. 'It is one of two global standards, the other being what is used in the United States.'
Mr Taylor noted that countries throughout Europe, as well as Hong Kong, Singapore, Australia and South Africa, had all effectively adopted IFRS, although for legal reasons they might give them a 'local' name. More recently, Canada started the process of adopting IFRS and India announced it would do the same.
One distinction is that the IFRS system is based on principles, while the US system is rule-based. Since this can lead to differences in interpretation and practice, the International Accounting Standards Board is now trying to create convergence.
Mr Taylor said that, as a result of the changes, Chinese companies were starting to assess assets based on 'fair value'.