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The Generally Accepted Accounting Practices (GAAP) is a set of principles created through accounting practices used as a base standard for the industry. Usually, US GAAP Audits are used in the United States, comparable to the International Financial Reporting Standards (IFRS) used in more than 180 countries.
What information is included in financial reports?
The basic objectives of the US GAAP audit state that financial reports should include information that is:
- Useful in assisting potential creditors, investors and other users in making rational investment, credit and other financial decisions
- Presentable to potential investors, creditors and other users in assessing the amounts, timing and uncertainty of prospective cash receipts
- Explanatory of economic resources, the claims to those resources and the changes in them
- Valuable for making financial decisions
- Helpful in making long-term decisions
- Constructive in improving the performance of the business
- Practical in maintaining records
When US GAAP Audit compliance is required by a company operating in China, Acclime can offer sophisticated and quality accounting, fully compliant with US Generally Accepted Accounting Principles, under guidance from the Public Company Accounting Oversight Board (PCAOB), AU150 standards, either for reporting services or to audit financial statements.
The International Financial Reporting Standards (IFRS) are widely regarded as the global language of accounting, with more than 113 countries around the world, including all of Europe, currently requiring or permitting IFRS reporting and 85 purely requiring IFRS reporting for all domestic listed companies.
However, the use of an IFRS audit significantly impacts your balance sheets and ratios if you have used another method before. Furthermore, a change in your method of accounting will impact your inventory cost, depreciation expense, interest & dividend expenses, asset valuation and much more.
Estimation of inventory cost
Inventories are physical products that your company will eventually sell to generate revenue and profit. Inventory costs represent a significant part of your Balance Sheet and ratios. Here are the three most common inventory cost methods: First-in, First-out (FIFO) and Weighted Average Cost. However, the First-in and First-out (LIFO) method is not permitted under IFRS.
Depreciation method and expenses
Long-term assets such as Property and Machinery & Equipment are assets that are expected to provide your company with long-term economic benefits. Usually, they represent a significant investment on your part and have specific accounting depreciation methods and expense rules to be applied. The most common depreciation methods that are permitted under IFRS are the Straight-line method, the Accelerated method and the Unit of production method.
Interest and dividend expenses
Interest and dividend expenses appear on the statement of cash flow. In this statement, the different cash flow is classified according to three different categories:
- Operating activities
- Investing activities
- Financing activities
The classifications have a significant impact on your business financial statements.
Long-term assets have a significant factor in a company’s real and book values. There are two methods of valuing long-term assets, and the method chosen will have a significant impact on the company’s value.
The two methods allowed under IFRS standard are:
- Historical cost
- Revaluation method
How can Acclime support with IFRS audit services
Acclime is proficient in the most up-to-date IFRS methods, and we take pride in our consistent and quality application of IFRS Audit standards and our capability to apply our knowledge to those organisations transitioning. Furthermore, our experts can explain and provide you with examples of the differences between the IFRS audit and any other country’s GAAP and the application of these to your business.
In addition, our experts are aware of different regulations in IFRS auditing (presentation of financial statements, consolidation statements, fixed & intangible assets (goodwill, for example), inventories, deferred taxes, equity and ratios) that could make a difference concerning your company’s revenue and profitability.
Contact our teams for expert support and further information about accounting & tax requirements in China to ensure you are compliant in the market.
Christophe Marquis, Director, Shanghai, firstname.lastname@example.org
Mei Qian, Accounting Services Director, email@example.com
Emily Shi, Partner, firstname.lastname@example.org
- VAT & sales tax filing in China
- Tax deregistration in China
- PRC tax receipt verification
- Corporate income tax (CIT) compliance in China
- Profit repatriation: Transferring money out of China
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