How do the new accounting standards change the reporting requirements of listed companies in China?
Terence Ho: The new Chinese Accounting Standards, to a large extent, represent a convergence with the International Financial Reporting Standard (IFRS). However, there are some acknowledged exceptions in certain areas given the unique circumstances in China. The changes made to the former accounting standards are significant. These significant changes include even the basic elements of accounting of recognition, measurement and disclosure. The adoption of the new Chinese Accounting Standards implies a shift from a “historical cost” basis to a more “fair value” basis for accounting. In this respect, fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable independent parties willing to enter into a transaction. By adopting the new accounting standards, management of a company is obliged to disclose more information, and in a different way. This will require senior management at Chinese companies to take new financial ratios
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