These stakeholders may require the financial information to be prepared under local accounting standards. This improves reliability and relevance of financial statements of the company and strengthens the trust of stakeholders. There are many countries in the world that currently permit or require IFRS for the purpose of statutory financial reporting, while many other countries have already incorporated IFRS into their local framework of accounting. This has been very successful for companies that are entering into the international market and are expanding globally.
The completion of annual statutory audits and settlement of all relevant tax liabilities are prerequisites for FIEs to distribute and repatriate their profits or dividends back to their home country. Failure to do so may result in extra expenses, penalties, or even revocation of their business license.
The CAS framework is based on two standards: It is widely viewed by the international community that ASBEs are now substantially converged with IFRS, with only some minor discrepancies in wording.
The ASSBEs use the ASBEs as a reference, but are more similar to tax laws in terms of their tax calculation methods, which simplify the process of making adjustments between accounting standards and tax rules.
Valuation methods for fixed assets — Under the IFRS, one may choose the valuation method for certain types of fixed assets. The company can value these assets either using the historical cost principle, or by applying a revaluation of assets. CAS, however, only allow fixed assets to be valued according to their historical cost.
An example would be the merging of two companies controlled by the same entity and having similar interests.
Apart from paying employees with company stock, CAS do not address certain types of employee benefits commonly offered by multinationals. Difficulties can arise when the parent company attempts to translate such a package to its Chinese subsidiary. In this case, the company may need to consult with the MOF as to how this transaction should be recorded.
As a result, the adoption of new IFRS standards is often delayed, or does not happen at all. This can lead to further divergence if the countries where other entities of the corporate group are established adopt the new IFRS rules earlier. The problem of different accounting standards is most visible when an overseas parent company requests financial information from its Chinese subsidiary.
Converting Chinese financial reports into a target accounting system can be fairly easy for large multinationals, as these companies have sufficient financial support for purchasing specialized software to complete the process. However, small and medium-sized companies often cannot afford the software needed for such conversions, and instead have to study the divergence of accounting rules and do the conversion manually.
As all FIEs are required to prepare financial reports by the end of the fiscal year, it is important for corporate accounting teams to fully understand Chinese accounting practice and ensure correct annual audit processes. This article was originally published on April 25,and has been updated to include the latest regulatory changes.
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The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.GAAP vs. IFRS comparison Through this course we have been taking a closer look into the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS).
The book lays out the major similarities and differences between . We will learn the primary focus of financial accounting and learn about General Accepted Accounting Principles (GAAP) and their key assumptions, as well as compare them to International Financial Reporting Standards (IFRS).
GAAP vs IFRS and Convergence Meet the Instructors. differences in these two sets of standards. Example: Differences in Asset Valuation between CAS, U.S.
GAAP and IFRS In both China and the United States, asset valuations are based on the historical costs of an asset. Revaluation of assets is not permitted in China and allowed only in the case of business combination under U.S.
GAAP. Download the guide IFRS and US GAAP: similarities and differences To be successful in the US capital markets, it is increasingly important to be financially bilingual – you have to speak both IFRS and US GAAP.
With respect to the categories of assets, liabilities, and stockholders' equity presented on the balance sheet (statement of financial position), what are U.S.
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|Add new comment||Generally Accepted Accounting Principles GAAP are the both formalized accounting and financial guidelines that businesses may have to follow. Companies listed on two exchanges, say the New York Stock Exchange and the London Stock Exchange, are often required to issue financial statements under one method and also provide a reconciliation to show what their financial performance would look like under the other.|
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GAAP and IFRS differences? IFRS statements may present property, plant, and equipment first in the balance sheet. Under IFRS, a write-down of inventory can be reversed in future periods if specific criteria are met.
Under GAAP, once inventory has been written down, any reversal is prohibited. Discontinued.