| Chinese Version          

 

Evidence from China on Whether Harmonized Accounting Standards Harmonize Accounting Practices
Shimin Chen , Associate Professor, Zheng Sun , Professor, Yuetang Wang , Professor
University of Louisiana at Lafayette.
Lingnan University, Hong Kong.
Shanghai University of Finance and Economics.
Nanjing University.
While international harmonization of accounting is gaining momentum in recent years, there is little empirical evidence on whether the harmonization of accounting standards leads to harmonized accounting practices and comparable financial reports. Benefiting from a unique research opportunity in China, this study provides such evidence. Since January 1, 1998, a newly promulgated Accounting Regulation for Listed Companies is in effect. This new regulation is the most comprehensive effort at harmonizing Chinese generally accepted accounting standards (GAAP) with International Accounting Standards (IAS). Based on a sample of listed companies required to reconcile accounting earnings from Chinese GAAP to IAS, we find no evidence that the Chinese government's efforts eliminated or significantly reduced the gap between Chinese and IAS earnings despite harmonized accounting standards. We explore reasons for the continued earnings gap after the 1998 regulation and find that a lack of adequate supporting infrastructure, manifested in excessive earnings management and low quality auditing, may explain the gap.
Received: August 2000; Accepted: April 2002
linke:http://aaajournals.org/doi/abs/10.2308/acch.2002.16.3.183

Evidence from China on Whether Harmonized Accounting Standards Harmonize Accounting Practices

 

Shimin Chen , Associate Professor, Zheng Sun , Professor, Yuetang Wang , Professor

University of Louisiana at Lafayette.

Lingnan University, Hong Kong.

Shanghai University of Finance and Economics.

Nanjing University.

 

While international harmonization of accounting is gaining momentum in recent years, there is little empirical evidence on whether the harmonization of accounting standards leads to harmonized accounting practices and comparable financial reports. Benefiting from a unique research opportunity in China, this study provides such evidence. Since January 1, 1998, a newly promulgated Accounting Regulation for Listed Companies is in effect. This new regulation is the most comprehensive effort at harmonizing Chinese generally accepted accounting standards (GAAP) with International Accounting Standards (IAS). Based on a sample of listed companies required to reconcile accounting earnings from Chinese GAAP to IAS, we find no evidence that the Chinese government's efforts eliminated or significantly reduced the gap between Chinese and IAS earnings despite harmonized accounting standards. We explore reasons for the continued earnings gap after the 1998 regulation and find that a lack of adequate supporting infrastructure, manifested in excessive earnings management and low quality auditing, may explain the gap.

 

Chen et al. (AH 2002), Evidence from China on whether harmonized accounting standards harmonize accounting practices.pdf