China to expand use of global accounting rules
China has moved closer to advancing its use of IFRS, the Chinese Ministry of Finance and the International Financial Reporting Standards (IFRS) Foundation have announced.
The two parties have formed a joint working group to explore how to expand the use of IFRS Standards within China, particularly for internationally oriented Chinese companies.
Chinese Accounting Standards (CAS) are now “substantially converged” with IFRS.
Analysts say that using international accounting rules could help reassure foreign investors about the quality of Chinese company accounts.
A joint statement from the Chinese Ministry of Finance and the IFRS Foundation said that using IFRS has “significantly enhanced the quality and transparency of financial reporting in China”.
China’s plans to expand its use of IFRS may put the United States – which has not yet adopted IFRS – under scrutiny. IFRS is not required or permitted for listed companies in the US. However, foreign private companies listed on American stock exchanges may report under IFRS, instead of using US GAAP.
The G-20 has endorsed the IFRS Foundation’s objective of establishing IFRS as the single set of high quality, global accounting standards.
More than 100 countries now require the use of IFRS for all or most publicly listed entities, including in the European Union, Australia and Canada.