If the world’s capital markets could use a harmonized accounting framework, it will have to wait as there is much to do before this becomes reality. This article aims to present a general overview of China’s General Accepted Accounting Principles (GAAP), U.S. General Accepted Accounting Principles of the United States, and International Financial Reporting Standards (IFRS), to analyze the differences between IFRS, U.S. GAAP and China GAAP using fixed assets as an example.
General overview of the IFRS
The International Financial Reporting Standards (IFRS) are the embodiment of the International Accounting Standards Committee (IASC) Foundation’s authoritative literature. These standards aim to “develop, in the public interest, a single set of high quality, understandable international financial reporting standards for general purpose financial statements” (The IASC came into existence in 1973 as a result of an agreement between accounting bodies in a number of countries; however, the name was changed to the IASC Board in 2001 when a new set of standards were adopted. These new standards are known as IFRS and are issued by the International Accounting Standards Board (IASB).
General Overview of PRC GAAP
China has experienced remarkable growth since it began to liberalize its economy in 1979. Accounting development in China mirrors changes in its environment, specifically, the historical environment, and has also affected its accounting standard setting in aspects of China’s economic, political, and social evolution. The new accounting system is largely based upon International Accounting Standards and the accounting system has experienced great changes as this has been implemented.
For more information about the differences between international and chinese accounting systems, please our China accounting experts.
