Institutional factors influencing China's accounting reforms and standards

By analyzing the changes in the accounting environment of China during the recent economic reforms, a paper places the development of accounting reforms in China into perspective and assesses the desirability of China's adopting accounting principles in close conformity with International Accounting Standards. The recent economic reforms, particularly the enterprise reform, in China have changed the corporate landscape and have profoundly altered the accounting environment. The Chinese accounting profession and government have responded with the enactment of a number of accounting regulations. These regulations have essentially transformed China's accounting from the traditionally rigid and uniform system into a predominantly Anglo-Saxon approach to financial reporting. The paper argues that accounting rules in China should not be formulated to cater to the need of a small number of firms which are already listed on overseas stock exchanges. Rather, China GAAP should be designed to serve China's large industrial and commercial enterprises that are characterized by extensive managerial autonomy and an effective separation of ownership and control.