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Effects of the New PRC GAAP

  • Lorenzo Riccardi
Chapter

Abstract

At a glance, new ABSEs have introduced substantial innovation in accounting principles and measurement requirements, such as the adoption of fair value. This change enhances the relevance of accounting information as it closely connects the external financial markets with the performance of companies. Despite that the actual implications of fair value could turn into difficulties in a clear determination of a reliable fair value for enterprises, leading to volatility.

Keywords

Financial Risk Accounting Information Require Disclosure Measurement Requirement Accounting Principle 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

At a glance, new ASBEs have introduced substantial innovation in accounting principles and measurement requirements, such as the adoption of fair value. This change enhances the relevance of accounting information as it closely connects the external financial markets with the performance of companies. Despite that the actual implications of fair value could turn into difficulties in a clear determination of a reliable fair value for enterprises, leading to volatility.

The big effort put in place by the Ministry of Finance has really made financial reports from Chinese entities closely comparable to those under IFRS. Still, some key differences stand between ASBEs and IFRS largely deemed to the unique characteristics featuring the Chinese economy. These disparities should be regarded as a further point for triggering harmonization of systems.

Irrespective of the formal aim of new ASBEs, it is equally important to underline how new standards have played an important role to boost relevance of information in financial statements. Another improvement reflected the required disclosure of financial risk management policies, especially the obligation for companies to disclaim if hedge policies have taken in accordance with hedge accounting requirements of new standards. All previous aspects have led to the modification and improvement of internal control systems (for instance, the establishment of internal control to monitor transactions of derivative instruments).

The following work is aimed at providing guidelines and explanations to describe the new Chinese ASBEs. The next sections cover each Article, providing the regulatory dispositions introduced in 2007 (in accordance with the original text) and COMMENTS on the most important changes with past version and differences against IAS/IFRS. Finally, some basic examples are introduced to help readers understand the different issues and rationale underlying the new provisions.

Copyright information

© Springer Science+Business Media Singapore 2016

Authors and Affiliations

  1. 1.ShanghaiChina

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