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What You Need to Know about Accounting & Auditing in China
- Hot Topics
Stephen Austin, CPA, MBAFirm Managing Partner
Swenson Advisors, LLPSan Diego, California
Accounting DayMay 12, 2008
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A Regional Full Service Accounting Firm with Global Outreach
www.SwensonAdvisors.com
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Overview of Chinese Accounting Standards
Accounting System for Business Enterprises (ASBE)
Chinese Accounting Standards (CAS)
Ministry of Finance (MOF)
Hong Kong
PRC
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Accounting Systems for Business Enterprises 13 Chapters
Chapter 1 General Provisions
Chapter 2 Assets
Chapter 3 Liabilities
Chapter 4 Owners’ Equity
Chapter 5 Revenue
Chapter 6 Costs and Expenses
Chapter 7 Profit and Profit Distribution
Chapter 8 Non-monetary Transactions
Chapter 9 Foreign Currency Transactions
Chapter 10 Accounting Adjustments
Chapter 11 Contingencies
Chapter 12 Related Party Relationships and Transactions
Chapter 13 Financial Reports
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Chinese Accounting StandardsEffective July 1, 1993
“BASIC STANDARD”
Plus 16 CAS
Disclosures of Related Party Relationships and Transactions
Cash Flow Statements
Events Occurring After the Balance Sheet Date
Debt Restructuring
Revenue
Investments
Construction Contacts
Changes in Accounting Policies and Accounting Estimates and Corrections of Accounting Errors
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Chinese Accounting Standards(continued)
“BASIC STANDARD”
Plus 16 CAS (continued)
Non-monetary Transactions
Contingencies
Intangible Assets
Borrowing Costs
Leases
Interim Financial Reporting
Inventories
Fixed Assets
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Future Accounting Standards
Segment Reporting;
Foreign Currency Translations;
Presentation of Financial Statements;
Earnings Per Share;
Accounting for Government Grants;
Discontinuing Operations;
Business Combinations;
Consolidated and Separate Financial Statements;
Impairment of Assets;
Disclosure by Banks and Similar Financial Institutions;
Financial Instruments: Disclosure and Presentation;
Agriculture;
Oil and Gas; Other Extractive Industries (mining, etc).
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Key Considerations
Chinese Accounting (traditionally) Designed for State Government Decision Making
National Macro Economic Control
Materially Principles e.g. Related Party Disclosures, Chapter 3
Related Portions Exclude:
Financial Sources
Public Utilities
Government Department and Agencies
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Other CAS Observations
Debt Restructuring
Revenue Recognition
Non-Monetary Transactions
Intangible Assets
Inventory
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CAS vs IFRS
Key Considerations
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What are IFRS’s?
A Single Set of Globally-Accepted, High Quality Accounting Standards
Developed by the Internationally Accounting Standards Board (IASB)
Successor of the International Accounting Standards Committee (developed IAS’s)
Used in Approximately 105 Countries and Growing
Standards are Principles Based and Less Extensive
Lack Guidance (including Industry Specific Guidance)
Frequently, the Application of IFRS Requires Judgment)
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IASB Structure
A Single Set of Globally-Accepted, High Quality Accounting Standards
Developed by the Internationally Accounting Standards Board (IASB)
Successor of the International Accounting Standards Committee (developed IAS’s)
Used in Approximately 105 Countries and Growing
Standards are Principles Based and Less Extensive
Lack Guidance (including Industry Specific Guidance)
Frequently, the Application of IFRS Requires Judgment)
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M&A Environment in China
1.3 Billion People
200,000,000 “Other Citizens”
10%+ Growth Rate
Key Manufacturing Hub of the World
Past 15 Years Largest Recipient of Foreign Private Investors and Development Nations
Foreign Invest Independent Guidance Catalog (10/31/07)
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EJV’s
and
CJV’s
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WFOE’s
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Chinese State Government Legislation
Effecting M&A in China
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Ethics and CorruptionIn Asia Today
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“Ethics has Left the Building”
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The Lack of Ethical Behavior is
Still Rampant
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Setting the “Tone at the Top”
Board of Directors
Audit Committee’s
Chief Executive Officer
Senior Management
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William Wilberforce:Authentic Leadership
He Changed the World
200th Anniversary Celebration
Outstanding Film in 2007
Metaxes, E, CC: Amazing Grace. New York, NY: HarperCollins Publishers, 2007.
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SOX
(Sin Management)
USA - Style
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Post Enron Era
US Accounting Fraud
577 Separate Cases
693 Fraud Convictions
1,000+ Corporate Executives
1,300 Individuals
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China Today
41,000 Executives Prosecuted in 2007
Multiple Sets of Book
FCPA – Still the World Standard
Audit Styles
Other
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Setting Up Representative Offices in China (RO’s)
1. Acquire Preliminary Approval as Needed
2. Register with the Administration of Industry an Commerce for Registration Certificate
3. Apply for Carving the Official Chops
4. Apply at the Bureau of Quality and Technology Supervision
5. Apply for Local Tax Registration
6. Apply for State Tax Registration
7. Apply for Approval at People’s Bank of China
8. Open Bank Account
9. Enter into Employment Contracts
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Swenson Hong Kong Office Expansion
Certificate of Incorporation
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Swenson Hong Kong Office Expansion
Calvin, Simon and Steve in the
reception area of Swenson’s Hong
Kong office
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Integra InternationalTrade Mission Highlights
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Integra InternationalTrade Mission Highlights
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Integra InternationalTrade Mission Highlights
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Integra InternationalTrade Mission Highlights
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Integra InternationalTrade Mission Highlights
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Integra InternationalTrade Mission Highlights
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CONTACT ME AT:
“Rise of the New Ethics Class”(Visit our Booth to Receive your Copy)
www.SwensonAdvisors.com