28 January 2019, AT 2:30 PM
ESCP Europe - Campus République - room
The Convergence of Chinese Accounting Standards with International Accounting Standards
- Pr. Léon LAULUSA,
Professor, ESCP Europe
- Pr. Lionel ESCAFFRE,
Professo, Université d'Angers
- Pr. Olivier RAMOND,
Professor, Université Paris-Dauphine
- Pr. Gilles DAVID,
Professor, Université de Bourgogne
- Pr. Yvon PESQUEUX
Professor, Conservatoire National des Arts et Métiers
Our empirical investigation comprises two basic sets of analyses. The ﬁrst set of analyses examines the accounting diﬀerences between IFRS and new Chinese GAAP on key accounting measures such as book value of equity and net income. The result of our empirical tests shows that both the diﬀerence of net income and the diﬀerence in asset recognition across the two systems are not signiﬁcant, which implies the good convergence of accounting numbers reported under new Chinese GAAP and under IFRS. These ﬁndings make exactly a good answer to our ﬁrst research question. The second set of analyses compares the ﬁnancial reporting quality under new Chinese GAAP and IFRS. The results of our hypotheses tests show that, consistent with the diﬀerent objectives of two accounting systems (new Chinese GAAP puts strong emphasis on reliability and prudence whereas IFRS is more investor-oriented), IFRS provide more value relevant and predictive accounting information than new Chinese GAAP (weak evidence), whereas there is more earnings smoothing, less discretionary accruals, more observed conservative accounting approaches, more timely recognition of losses and more comparative accounting information under new Chinese GAAP than those under IFRS (strong evidence). Furthermore, our results are in line with IFRS being balance sheet- and fair value-orientated and new Chinese GAAP being prudent, income smoothing- and historical cost-oriented. The ﬁndings provide an aﬃrmative answer to our second research question.
Given the inﬂuential status of China as an emerging economy, the ﬁndings of our study have important implications for other emerging economies around the world. And also, our results inform Chinese and international standards setters China’s IFRS harmonization (convergence) strategies in the future.