There are some important alterations in its accounting system since China started its economic reform from a planned to a market-oriented economic system in 1978. Harmonizing to Ding and Su ( 2008 ) , “ before the economic reform that began in 1978, the unvarying accounting system in China are consulted the accounting theoretical account of Soviet Union and it was chiefly designed to help its be aftering economic system system. “ There was no existent accounting system of external fiscal coverage as it is normally understood ” ( Roberts et al, 2008 ) .
After 1978, due to the economic reform and the alteration of demand for an accounting system, there have many other investors and stockholders. And the Stock Exchange was foremost published and opened in Shanghai in 1990. They prefer holding more information for decision-making. Therefore, there are some liberalisation but selective in its accounting system ( Nobes and Parker, 2010 ) .
The twelvemonth of 1992 was besides the historical advancement for the reform of accounting in China ( Ding and Su, 2008 ) . In this twelvemonth, Deng Xiaoping allowed market based attack and the Ministry of Finance of China besides promulgated the Enterprise Accounting System, fundamentally come from western accounting for describing to the external users and assisting them invest, this is the starting of Chinese accounting ordinance ( Tang, 2000 ) .
During the period 1997-2001, new accounting criterions were issued and adopted in response to the hard of market development ( Ding and Su, 2008 ) . Nobes and Parker ( 2010 ) besides believed that the most important event was its accounting standard support day of the month and closer to IASs of western accounting by Enterprise Accounting System in 2000 in order to go the rank of the WTO in 2001 and hold more chance for come ining into the international market and practise ( Zhu and Ma, 2010 ) .
Furthermore, for pulling the investing and doing Chinese companies go into planetary capital market ( Wei, 2012 ) , China has harmonized and revised the New Accounting System for Business Enterprises in 2007 to convey pattern mostly into line with IFRS and closer to Western accounting even though perceived potency for manipulating net income. The general tendency was for gradual convergence with IASs ( Tang, 2000 ) .
Institutional/ Other factors
In the planetary accounting harmonisation state of affairs, China aims to at the accomplishment of closer to IFRS. However, the harmonisation in China is non ever working successfully. Hu ( 2010 ) believed that the characteristic accounting environment, low quality of comptroller and the execution of new accounting criterions are three chief jobs that affect the harmonisation. And these jobs would do the deformation of accounting information, the net income use, and the devastation of socialist market economic system order and the long-run development of endeavors ( Zeng, 2010 ) .
There are legion surveies point that the consequence of political and institutional factors in China make its accounting information less dependable ( Eccher and Healy, 2000 ; Chen et al. , 2001 ) . As they mentioned that China is a high centralised state with one-party political system and Chinese accounting criterions were developed in a high politicized environment and greater control by authorities, the CICPA is besides under authorities influence and has less independency and enforcement of IAS. Besides, there are over 75 % local auditing houses in China are state-owned auditing house and many listed houses are state-owned or authorities bureau, these make hearer holding less incentive to maintain independency ( Green, 2003 ) and besides do them exaggerating net incomes to do the fiscal statement expression good, due to authorities to a great extent relies on accounting net incomes to measure the public presentation of the state-owned listed houses ” ( Xiao, Zhang. and Xie, 2000 ) . However, Wei ( 2012 ) argued that China is a public ownership system state, stated-owned economic system as its cardinal function and decides that the province is the major users of accounting and its information. “ The accounting criterions and policies should run into the demand of authorities and its macroeconomic determination, therefore the effectual manner is the authorities set uping the accounting criterions with the control of accounting profession and the coordination between different ways ” ( Tang, 2000 ) . And Liu ( 1997 ) besides argued that pattern shows that the accounting signifier with taking the authorities as the chief organic structure is the most effectual manner and in line with the national status in China. Currently, China should maintain a powerful and centralized planning system instead than the independency of accounting criterions in western states in order to implement and turn successfully even though it would do corruptness and curtail the autonomy and independency.
And for the economic system, Liu ( 1997 ) besides suggested that the IFRS/IASs largely based on the background of the developed and private market economic system in western states, but China until now is still on the initial phase of market economic system and it is a underdeveloped state. The IFRs/IASs are non all and ever suit for the Chinese specific economic environment. For an illustration, if China imports the “ just value ” of the IASs under the imperfect market economic system, it would do the net income use.
Besides, there are some differences of legal system between China and the background of IFRS. Harmonizing to Zhang ( 2010 ) , most western states belong to the common jurisprudence system and rely more on the flexible professional opinion of comptrollers. But missing professional opinion is a job for China, because they get used to follower the senior and authorization and prefer accepting the accounting criterion regulations ( Wright and Cheng, 2002 ) . Dinging and Su ( 2008 ) besides believed that Chinese comptrollers had less preparation in doing professional opinion. And it could besides caused by the educational system. In China, rote Learning is popular instead than critical thought ( Sun, 2010 ) and Chinese pupils are expected to be quiet, non to inquire inquiries or disrupt the category as it is considered rude ( Watkins, 2002 ) . Therefore, the accounting criterions and systems in China are established and controlled by the authorities, go forthing small infinite for accounting policies and comptroller ‘s professional opinion ( Zhang, 2010 ) . Chen and Li ( 2004 ) besides suggested that China belongs to the codification jurisprudence system, and the concern accounting criterions besides holding the force of jurisprudence. And Chinese authorities prefers traveling towards unvarying regulations for all endeavors in its legal system ( Roberts et al, 2008 ) .
In add-on, China besides wants to put some accounting regulations to suit its revenue enhancement system, command the accounting profession and fulfill its national policy and planned economic system instead than supplying fiscal information for the demand of investors in a market-based economic system ( Wu and Kao, 2006 ) . Many endeavors in China would minimise their net income in their fiscal study in order to minimise their revenue enhancement, but most western states would maximum their net incomes to pull more investors.
Culture is besides a important factor act uponing the international convergence with IFRS in China. Under the theoretical account of Hofstede ( 1984 ) and Gray ( 1988 ) , and as Solas and Ayhan ( 2008 ) mentioned, Chinese civilization is fundamentally characterized by Bolshevism, statutory control and had a great impact on the development of Chinese accounting. China traditionally closely controlled all endeavors by centralized programs system. It is improbable to give up this power to a professional organic structure so far ( Roberts et al, 2008 ) . Besides, Chinese people are still expected utilizing the uniform regulations to conform to the ordinances and established norms and governments instead than flexible rule and guideline of IFRs/IASs. This is because “ conformance is achieved by big power distance within hierarchal relationships ” ( Kirkbride et al, 1991 ) . And Lampert and Sullivan ( 2008 ) besides suggested that “ China cares about catching up to international accounting criterions and rules, but it will take clip, endowment and preparation to better its professional opinion ” . In add-on, China ‘s accounting system has high degree of uncertainly turning away, conservativism and secretiveness. Chinese authorities likes to be after everything in progress such as the “ five old ages program ” , they do non desire to see something go on unexpected due to the complex state of affairs ( Roberts et al, 2008 ) .
These factors with a big power distance would hold some jobs. They may both do a statutory control system, a weak accounting professional, a weak and imperfect equity market and the inertial consequence of accounting tradition and cultural factors ( Xiao et al, 2004 ) . And harmonizing to the position of Riley and Cai ( 2009 ) , the conservativism and secretiveness cause the job that and many Chinese endeavors do non desire to unwrap much information in order to protect their corporate net income. A higher power distance and uniformity besides can restrict the revelation, professional opinion and do low transparence. And if struggles rise, the subsidiaries who possess less power are expected to compromise and to suit their higher-ups ‘ wants ” ( Kirkbride et al. , 1991 ) .
However, McSweeney ( 2002 ) criticized that Hofstede ‘s work on a figure of evidences including the inclination to compare cultural groups with states, while Baskerville ( 2003 ) besides argues that it is non an effectual and good manner to believe about civilization with quantification, measuring and treatment of cultural dimensions ( Roberts et al, 2008 ) . More significantly, those theoretical accounts have been stated many old ages ago, China has a rapid development in every facet. They may non all suit for the current state of affairs. Besides, China is a large state where has immense spread between different countries by economic system and civilization ( Zhang and Edwards, 2003 ) .
Furthermore, the Confucianism civilization of China is the accent on interpersonal relationships ( Hwang, 1987 ) . “ Guanxi ” dominate all concern and societal activities in China ( Hwang and Staley, 2005 ) . Solas and Ayhan ( 2008b ) believed that Guanxi is more important than formal legal contracts and besides reduces the demand for high quality public fiscal coverage and revelation, because some houses might hold a close ties with the bank, they tend to lower importance of single stockholders, have a penchant for internal financess and bank loans over public equity and debt. “ If China follows the general rules of IASB, these would take to some jobs of enforcement, widespread bureaucratic corruptness, confusion and a important influence on the Chinese legal system ( Su and Littlefield, 2001 ) . However, Luo and Chen ( 1997 ) argued that guanxi-based concern variables are ‘significantly and positively ‘ related to accounting and selling public presentation. For the whole system in China, guanxi can take more positives and benefits than jobs. It is easier carry oning concern and besides take downing your cost and bad debt disbursals ( Fan, 2002 ) .
Presents, China has become the 2nd largest economic system and has a great development in its accounting system. The internationalization of Chinese accounting criterions and in line with IFRS/IASs is an inevitable consequence for the gradual growth of socialist market economic system system. At the same clip, the farther alterations and how can China get the better of its jobs are still the controversial issue.
Harmonizing to the ICAS ( 2010 ) , some interviewees tend to believe that China can follow FASB because of elaborate regulations. But Some ( Wang et al, 2009 ) believed that “ Chinese Accounting Standards will go on to be updated in line with IFRS developments in order to pull more investor ” . IFRS is the most utilizations in many major states instead than US GAAP, China would hold more concern chances and integrating with the universe economic system by IFRS. More significantly, China may prefer IASB instead than FASB due to the political factors. China does non desire to see there is a big controlling in the United State of America.
However, there is a long manner to harmonise with IFRS for China. Liu ( 2012 ) besides believed that “ Follow the IASB straight would hold many jobs and dearly-won for China ” . Although Chinese comptrollers have a dramatic increasing in their professional opinion and going progressively independent, Chinese legal system still can non alter due to other complex factors. This is because the institutional factor and civilization in China are more complicated and incorporate together. It is hard to alter and get the better of. At the same clip, the Chinese authorities would take a firm stand and protect its one-party political system and big power in the hereafter. Besides, big power distance, strong unsteadily turning away, low transparence can non alter in a short clip. Therefore, the development of China ‘s accounting system needs to suit its particular circumstance,
In decision, China can non get the better of these jobs easy in a short clip. Therefore, China must critical evaluate and see its existent national conditions, besides use the chance to deep research and absorb the benefits from IFRS in its development. This is likely the effectual manner for bettering the accounting system in China and its economic growing healthy.
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