PGDBFS 103 International Financial Accounting and

Transcript:PGDBFS 103 International Financial Accounting and:
PGDBFS 103 International Financial Accounting and Policy (IFAP) Comparative Accounting – Accounting environments in five countries Peoples Republic of China (PRC) Background The ultimate legislative authority rests with the National People’s Congress. With the formation of PRC in 1949 the government adopted a policy of public ownership and centralized management of business and economic resources. However the state owned enterprises proved to be an economic failure. This lead to economic reforms, transforming the centrally planned economy in to a socialist market economy. This is a market based economy model with socialist principals. Private enterprises, corporative and joint ventures coexist and compete with state run entities. Opened doors to foreign direct investments (FDI). In early 1990’s China opened its stock exchanges in Shanghai and Shenzhen to facilitate the non-governmental ownership and FDIs. Shanghai stock exchange is the 5th largest stock exchange in the world today. China’s accounting practices were often criticized for falling short of those set of IASB. An accounting practice aimed at measuring how well production targets are met in a planned economy was largely incapable of meeting the requirements of a market economy. Peoples Republic of China (PRC) Accounting profession During Feudal system, people respected scholarly officials. Accounting for business was viewed as a non-skilled profession. The first local professional accounting body, the Chinese Chartered Accountant’s Society of Shanghai was established in 1925. The economic reforms in 1980s gave rise to a large number of Sino-foreign joint ventures in China. This resulted in the reemergence of private auditing profession. The Chinese institute of Certified Public Accountants (CICPA) was formed in 1988. Earlier Accounting firms were overseen by the Ministry of Finance, while the audit firms were under the State Administration of Audit (SAA) a department within the State Council responsible for government audits. The competition between Accountants and Auditors was confusing. Consequently, Ministry of finance was given the authority to regulate both the accounting and auditing professions. At present More than 200 of the world’s largest 500 companies have invested in china. All the leading international accounting firms, following their clients, have moved in to China. Peoples Republic of China (PRC) Guanxi Guanxi (pronounced gwon-she) is a Chinese term meaning "networks" or "connections" is a central idea in Chinese society. The odds of gaining access to a business opportunity and then winning that opportunity are higher when you work your connections. In recent years, the ethical consequences of