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A comparison of reported earnings under Chinese GAAP vs. IAS: evidence from the Shanghai Stock Exchange
journal contribution
posted on 1999-06-01, 00:00 authored by C J P Chen, Ferdinand GulFerdinand Gul, X SuThis paper reports the results of an empirical examination of the
difference between earnings based on Chinese GAAP and those based on International Accounting Standards (IAS). Specifically, the study determines how current Chinese accounting standards are different from the IAS, whether these differences are systematlcally biased toward under- or overstated earnings, and which items from the financial statements contributed most to these differences. The findings suggest that reported accounting earnings based on current Chinese GAAP are significantly different from those based on IAS. On average, the reported earnings determined under the Chinese GAAP are 20-30 percent higher than earnings reported under IAS. After restatement, 15 percent of the B-share companies changed from a reported profit to a reported loss. The findings suggest that the differences between the two sets of earnings are caused by differences in accounting standards and financial rules, opportunistic applications of Chinese GAAP, and unusual market-wide events. An analysis of recently promulgated accounting standards indicates that the difference between the two sets of accounting earnings is likely to be significantly reduced from those reported for 1998 as a result.
difference between earnings based on Chinese GAAP and those based on International Accounting Standards (IAS). Specifically, the study determines how current Chinese accounting standards are different from the IAS, whether these differences are systematlcally biased toward under- or overstated earnings, and which items from the financial statements contributed most to these differences. The findings suggest that reported accounting earnings based on current Chinese GAAP are significantly different from those based on IAS. On average, the reported earnings determined under the Chinese GAAP are 20-30 percent higher than earnings reported under IAS. After restatement, 15 percent of the B-share companies changed from a reported profit to a reported loss. The findings suggest that the differences between the two sets of earnings are caused by differences in accounting standards and financial rules, opportunistic applications of Chinese GAAP, and unusual market-wide events. An analysis of recently promulgated accounting standards indicates that the difference between the two sets of accounting earnings is likely to be significantly reduced from those reported for 1998 as a result.
History
Journal
Accounting horizonsVolume
13Issue
2Pagination
91 - 111Publisher
American Accounting AssociationLocation
[Lakewood Ranch, Fla.]Publisher DOI
ISSN
0888-7993eISSN
1558-7975Language
engPublication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
1999, American Accounting AssociationUsage metrics
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