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The influence of institutional on China’s accounting. and why china can not full use IFRS

The influence of institutional on China’s accounting. and why china can not full use IFRS

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Expert Solution

Accounting standards plays a vital role in daily economic activities in regulating the practice of financial accounting and balances benefits of different stake holders. It helps in reducing investment risk and stabilizes the capital market. International Financial Reporting Standards (IFRS) are standards for Financial Reporting issued by the International Accounting Standards Board keeping in specifying broad guidelines on how financial reporting around the globe should be done.

In global market it’s important to have certain standards of financial reporting for easy understanding and comparison of various financial statements. IFRS needed to prevent material manipulation or errors in financial statement, and to help in global harmonization.

In 2007 china adopt new accounting standards for business enterprises (ASBE). In 2017 China's national standards are substantially converged with IFRS Standards, and China has committed to adopt IFRS Standards for reporting by at least some domestic companies although there is no timetable for completion of the process.

China’s public sector model is similar to Japan. The ministry of finance of china is the absolute authority in the process of standard setting. There is no interference from other interest groups. No matter what kind of model the country choose in their accounting standard setting, both public and private sectors have to deal with government intervention. The development of accounting theory, legal, and cultural factors are few factors which restricts china to make full use of IFRS.


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