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China seeks to deepen ties with global accounting rules
[LONDON] China will look at how its international companies could make greater use of cross-border accounting rules to better inform investors, the Chinese authorities and a global accounting body said on Tuesday.
The London-based International Accounting Standards Board (IASB) and the Chinese Ministry of Finance said they had created a working group to build on a decade-old cooperation agreement.
The earlier agreement led to China moving its book-keeping rules substantially in line with the IASB's, used in more than 100 countries, including within the European Union, but not the United States.
The Group of 20 economies (G20) has set a goal of a single set of high-quality, global accounting rules to make it easier for capital to flow across borders and for investors to compare companies.
China's assistant minister of finance Dai Bohua said China wanted to meet the G20 goal through full convergence with IASB's rules, known as International Financial Reporting Standards or IFRS. "This objective is compatible with China's reforms and development," the statement said.
More widespread use of international rules could help reassure investors from outside China about the quality of accounts published by Chinese companies.
The US Securities and Exchange Commission, which regulates US stock markets, has de-registered dozens of Chinese companies in response to accounting scandals that began surfacing in 2010.
While stopping short of outright adoption of IFRS, such backing from the world's second-largest economy is a shot in the arm for the IASB, as the United States conducts a protracted debate on whether to back full convergence.
In return for the commitment to IFRS standards, China will be kept fully involved in the development of the rules.
"Such involvement is fully consistent with the request of the G20 to deepen the participation of emerging economies in the work of the IFRS Foundation and the IASB," the joint statement said.
Strengthening ties between China and the IASB will put the spotlight back on the United States and its use of IFRS rules.
The US authorities could opt for a "third way", allowing international companies to file statements to US regulators based on IFRS rather than the US GAAP system.
The United States already allows foreign companies listed on American exchanges to use IFRS for filing US regulatory statements.