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GAAP, SEC & IFRS compliance in China.

Acclime provides specialist accounting expertise to meet the needs of our clients with GAAP and IFRS requirements. We work with our clients to help them follow the SEC regulations on public companies.

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Remain compliant with international standards.

Timely conversions

Our staff have first-hand experience of working in complex group structures within a listed environment, and can extract the required reports and projections efficiently.

Assured quality

With a history of international experience and expertise, our dedicated team will meet compliance requirements and you can be assured that the results will be of the highest quality.

Strong collaboration

Our team will work with you to make sure that you are able to gain an understanding of the processes and can work through any difficult steps throughout the compliance process.
International accounting standards

Our international compliance services.

  • IFRS

    Acclime is experienced in the preparation of IFRS financial statements and our staff have first-hand experience of working in complex group structures within a listed environment, and can extract the necessary reports and projections required within IFRS to support ‘fair value valuation’ aspects. We are experienced in liaising with external valuation specialists where they are needed, including complex IFRS share-based payment valuations, intellectual property and valuation of financial investments and derivative financial instruments.

    IFRS compliance accounting repackaging

    When changing or moving through regions, accounting standards can also change. Often your accounting strategy needs to be changed, altered or repackaged to meet these new requirements. At Acclime we have an international cross-border focus that allows us to offer you expert advice for a multitude of scenarios, suitable to any and all changing needs.

    US companies, or companies that have previously dealt with accounting in the US, who wish to convert from US GAAP to IFRS, will need to initially apply for IFRS, (first-time adoption of International Financial Reporting Standards). Retrospective application of accounting principles can be very difficult, even when you are just getting started with financial accounting and are looking to be in line with IFRS standards and are attempting to bring uniformity throughout your company.

    Our experience at Acclime lets us offer a high quality of service in ensuring accommodation of IFRS for your company in a timely and personal manner.

    IFRS public company compliance

    The aim of IFRS is to provide a globally recognised structure for the preparation and disclosure of a public company’s financial statements. Rather than setting industry-specific rules for reporting, IFRS provides general guidance on financial statement preparation.

    For large companies that operate subsidiaries in different countries, using an international standard is especially important. It will simplify accounting procedures by allowing a company to use one reporting language throughout. A single standard will also provide investors and auditors with a cohesive view of finances.

  • SEC public company compliance

    Acclime, being a Public Company Accounting Oversight Board (PCAOB) registered company and having a history of international experience and expertise gives us the capabilities to offer assistance on all levels in assuring compliance with SEC for public companies. Even if a company maintains honest records and are outstanding at accounting for their own finances, the strict requirements for compliance have been seen to reveal inefficiencies or weaknesses in the management of finances. Therefore, by having our dedicated team assist with meeting compliance requirements, it can be ensured that the results will be of the highest quality.

  • US GAAP compliance

    US GAAP Financial Statement Preparation

    One of the final steps in the accounting cycle is the preparation of the financial statements. Though often feared as a very intimidating portion of small business accounting and often seen as a time consuming affair for larger corporations, Acclime will remove the stress and burden with its team of amenable and dedicated staff.

    US GAAP conversion

    Acclime will help you understand how changes to US GAAP affect your financial statements and assist you in making the complex accounting policy decisions required. Our team of specialist and experienced GAAP practitioners will aid you in supplementing a company’s accounting resources by providing real time advice to specific queries related to US GAAP.

  • Other GAAP

    Generally Accepted Accounting Principles (GAAP) are a set of rules and guidelines that were created so that there would be uniform financial reports filed by publicly traded companies. As financial reports have a large impact on an investor’s decision, the GAAP has been important in creating consistency, fairness, honesty and accuracy in the measurement and disclosure of financial information.

    Acclime has extensive experience working with entities utilizing US GAAP and those using GAAP from another region. Our strong international elements help us, throughout China and Hong Kong, offer an all-rounded expertise in any accounting standard that is required.

Single time- or project-based fee

Common questions.

Does China follow international accounting practice?

China does not follow international accounting policies and guidelines, although it has been moving in this direction for a while and with its accession to the World Trade Organisation will be fully compliant within a few years. Many of the accounting regulations are the same or similar to international practice, however it is important for organisations in China to understand the differences.

Tax deductibility for instance is different and a lack of understanding of this could lead to significant tax charges on such items as intercompany transactions. China treats transfer pricing with high importance and as with many other countries it wants its fair share of the international tax pie. Meanwhile proper planning and compliance can reduce an organisation’s tax burden.

Another area where differences lie is in depreciation of capitalised assets. China specifies that companies must use the straight-line method unless they obtain approval from the Ministry of Finance for use of an accelerated method. The period over which a company may depreciate its assets also can vary to that of the holding companies own country’s accounting practice. The depreciation rates per China’s income tax law are:

  1. For houses and buildings: 20 years;
  2. For airplanes, trains, shipping vessels, machinery, mechanical apparatus, and other production equipment: 10 years;
  3. For fixtures, tools and furnishings related to production and business operations: 5 years;
  4. For transport other than airplanes, train, ships: 4 years;
  5. For electronic equipment; 3 years.

Companies therefore on the one hand need to comply with their HQ’s requirements, being usually their countries GAAP, whilst on the other hand maintain compliance with China’s rules and regulations. LehmanBrown provides assistance in setting up accounting procedures and systems to bridge this.

What is the difference between Western and China’s accounting standards?

In Western countries, although amendments and revisions to accounting practices or standards do not have legal binding power, they are formulated according to an existing national legal framework which is provided in most cases by Companies Ordinance or Acts. Companies Ordinance or Acts together with other regulations applicable to individual industries, such as the Banking Ordinance for financial institutions and Listing Rules or Securities Acts for listed or public companies, provide a framework upon which accounting professional bodies formulate accounting and auditing standards. These standards form the basis for establishing accounting principles, and perhaps conventions, that allow enterprises flexibility in formulating their own accounting policies best suited to their individual circumstances. The ultimate objective, in a nutshell, is to produce a set of financial statements that are ‘true and fair’.

Until 1994, China lacked a regulatory framework on which accounting and auditing standards could be set since the country’s first national Companies Laws were not effective until 1 July 1994. The lack of such a framework also rendered the formulation of other regulations, such as the national Securities Laws and Listing Regulations, more difficult and time consuming.

Nevertheless, having realised the need for establishing acceptable accounting principles to enable PRC enterprises to attract foreign investment or have their stocks listed on overseas markets, the MOF promulgated a separate set of accounting regulations for selected joint stock companies in January 1992.

In addition, MOF was made effective on July 1, 1993, and were the first set of accounting standards – Accounting Standards for Enterprises – applicable to all PRC enterprises. Although it might be confusing at times which accounting regulations or standards should be applied, together with the then Accounting Regulations for Foreign Investment Enterprises of the PRC, they have provided relatively uniform accounting practices for enterprises to follow in preparing their financial statements. More importantly because of the lack of a complete regulatory and conceptual framework, these accounting rules or regulations are so comprehensive that they encompass accounting concepts, disclosure requirements, accounting entries, control procedures, record keeping and some aspects of auditing requirements and liquidation.

With the introduction of the Accounting Law in 1999, the Regulations on Financial Reporting of Enterprises in 2000 and the Accounting Systems for Business Enterprises in early 2001, which harmonises the different accounting standards and regulations applicable to different enterprises, the framework of modern Chinese accounting has finally become clear. With the implementation of the Accounting Systems for Business Enterprises in 2006, accounting standards in China have become more convergent with IAS and IFRS.

What are the accounting concepts and bases employed in China’s accounting regulations?

The general accounting principles or concepts employed in China’s accounting regulations include accuracy, completeness, consistency, comparability, timeliness, materiality, accrual basis, matching, prudence, substance over form and going concern. By and large, the principles mirror those of IAS and IFRS . Other major features of these regulations are as follows:

  • The historical cost convention is prescribed. Assets are required to be recorded at purchase cost (less any necessary impairment provision) and revaluations are strictly prohibited except when allowed by other State provisions.
  • The concept of fair market value is not commonly used due to the limited existence of open markets.
  • These regulations also require companies to use the calendar year, which is January 1 to December 31, as their financial year.
  • The double-entry bookkeeping method should be adopted. Records in accounts and books have to be made in Renminbi (Yuan) (the lawful currency of the PRC). Transactions and balances denominated in foreign currencies have to be converted into Renminbi at the official rate, which may differ from the current market rate. All records and balances of transactions made in foreign currencies and the exchange rate used must be maintained for reference.
  • A clause in these regulations specifically requires the appropriation of a collective Welfare Fund and a Statutory Reserve Fund from profit after tax.
  • Due to the infancy of the new systems, certain footnote disclosures may not be as comprehensive as those acceptable elsewhere in the world. Yet, in certain areas, the Chinese standards are extremely stringent. This includes disclosing the corporate identity of related parties and commenting on the fairness of transactions conducted between related parties, and preparing the cash flow statements using both the direct and indirect methods.

The old standards are neither broad nor flexible enough to allow discussion or maneuverability on particular subjects. For the first time, ASBE gives management the authority to exercise professional experience and judgment. While the setting of the ASBE has in theory narrowed the gap between accounting issues in China and those of the Western world, the rigour of applying the ASBE may vary from province to province and from company to company.

What is the relationship between the Accounting Standards and the Accounting System?

Both the Accounting system and Accounting standards constitute an integral part of China’s unified accounting system. As administrative documents, they set out the rules for accounting such as the recognition, measurement, disclosure and reporting of accounting elements. While both are formulated and promulgated by the MOF, certain differences exist between the two.

Firstly, in terms of the scope of application, specific accounting standards are mostly applicable to joint stock limited companies although some of them also apply to other enterprises. As for the Accounting System, apart from joint stock limited companies, other qualified enterprises may also adopt the system but prior approval is required for state-owned enterprises wishing to implement the system.

Secondly, the Accounting System covers all aspects of an enterprise’s transactions and events. In other words, if an enterprise falls within the scope of the Accounting System, the accounting treatment of all its transactions and events must be handled according to the stipulations of the system. As for specific accounting standards, they only govern certain transactions and events or certain accounting aspects of an enterprise. For instance, all the 13 specific accounting standards issued to date merely deal with specific transactions and events of an enterprise.

Thirdly, stipulations concerning the recognition, measurement, disclosure and reporting of accounting elements contained in the specific accounting standards are more general, with no stipulations on how accounting records should be made. By comparison, stipulations in the Accounting System are more specific, giving detailed rules on the account titles and instructions for use.

What are the regulations regarding the establishment of a Financial Accounting Department in China?
FIEs should establish a financial accounting department in the place where it is located, to be manned by qualified financial and accounting personnel responsible for handling financial and accounting matters in accordance with the law. (MOF has strict management guidelines regarding the qualifications of financial and accounting personnel.)
What are the forms and content financial statements in China?
Under the Accounting Laws, the Regulations on Financial Reporting of Enterprises and the ASBE, financial statements or reports should comprise a balance sheet, income statement, statement of changes in equity, cash flow statements and notes to the financial statements. The regulations also cover classification of assets and liabilities in the balance sheet.
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