The Harmonization of Chinese Accounting Standards with International Accounting Standards: An Empirical Evaluation

Using China as the case of a developing country, this study empirically evaluates whether the efforts made by China since the early 1990s to harmonize their domestic standards with IAS have been successful. Four research questions are addressed and eight hypotheses are developed to investigate the current level of harmonization and whether the extent of harmonization improves with the issuance of the most recent Chinese GAAP. Chinese 1992 GAAP, 1998 GAAP, and 2001 GAAP are reviewed and compared with IAS to evaluate de jure harmonization of Chinese GAAP with IAS (that is, harmonization in standards). Firms that issue both A and B-shares in China are used to evaluate de facto harmonization of Chinese GAAP with IAS (that is, harmonization of practices). The final sample includes the 1999 and 2002 annual reports of 79 Chinese listed firms that issue both A and B-shares. A checklist instrument containing 77 measurement items was developed from IAS1-40. Different measures are used to evaluate harmonization, including rank of closeness, compliance index, consistency index, and conservatism index.Overall, the findings of this study indicate that the accounting reform in China has been effective in harmonizing Chinese GAAP with IAS. Nevertheless, noticeable variances between Chinese GAAP and IAS still exist in key financial measures. The study provides strong evidence showing that the harmonization of accounting regulations is highly relevant to the harmonization of accounting practices, as improved compliance of Chinese listed firms with IAS, improved comparability of firms \u27 accounting choices in their annual reports prepared under Chinese GAAP and IAS, and reduced earning gap between Chinese GAAP-based and IAS-based net incomes are detected with the issuance of the most recent Chinese GAAP in 2001

Economic Consequences of Auditing Standards: Evidence from Auditing Standard No. 18 Related Parties

In 2014, the PCAOB adopted a new auditing standard - AS 18 Related Parties - to improve auditors’ performance in related-party transaction (RPT) auditing. In this study, we investigate the impact of AS 18 on firms’ real RPT activities and audit fees by examining six years’ data surrounding the effective date of AS 18. Using a matched-pair difference-in-differences approach, we find significantly reduced RPT activities and increased audit fees following the adoption of AS 18. Our findings reveal that AS 18 has a greater impact on small client firms, particularly firms audited by non-Big-4 firms. In contrast, the Big-4 firms had already taken measures to improve their RPT audit procedures. We also find a more pronounced effect for firms with high ex-ante fraud risk

Does Convergence of Accounting Standards Lead to the Convergence of Accounting Practices? A Study from China

In this empirical study we examine whether China\u27s efforts to converge domestic accounting standards with International Financial Reporting Standards (IFRS) over the past 15 years have resulted in the successful convergence of Chinese listed firms. This study is unique in that we evaluate convergence of firms\u27 accounting practices from three perspectives: (1) the level of compliance with Chinese GAAP and IFRS, (2) the consistency of accounting choices under Chinese GAAP and IFRS, and (3) identification of significant differences in the net incomes produced under Chinese GAAP and IFRS (earnings gap). Using the 1999 and 2002 annual reports of 79 Chinese listed firms we find improvement in both compliance with IFRS and in the consistency of the accounting methods used in annual reports prepared under Chinese GAAP and IFRS. We also find a reduction in the earnings gap from 1999 to 2002. However, interestingly we observed that Chinese listed firms\u27 compliance with IFRS is significantly lower than their compliance with Chinese GAAP. Overall we believe that our findings suggest that in China the convergence of accounting standards has been a conduit to the convergence of accounting practices

Acceptance of China Research in Western Accounting Journals (1978-2007)

This study provides a statistical analysis of the research involving mainland China accepted in Western accounting journals in the past thirty years (1978-2007). The analysis focuses on assessing the level of acceptance of China research and examining the publication patterns of these studies. Based on the results, the study then explores factors explaining the findings, and provides critical assessments on the status quo of China research, suggestions to cope with current problems, and suggestions to promote China research

Acceptance of China Research in Western Accounting Journals (1978-2007)*

This study provides a statistical analysis of the research involving mainland China accepted in Western accounting journals in the past thirty years (1978-2007). The analysis focuses on assessing the level of acceptance of China research and examining the publication patterns of these studies. Based on the results, the study then explores factors explaining the findings, and provides critical assessments on the status quo of China research, suggestions to cope with current problems, and suggestions to promote China research. JEL classification: M

Adaptability to fair value accounting in an emerging economy: A case study of China's IFRS convergence

Purpose – This paper seeks to assess the feasibility and desirability of a major emerging economy adopting and implementing fair value accounting (FVA), as codified in the International Financial Reporting Standards (IFRS), by studying China's recent experience. Design/methodology/approach – The paper examines the extent of FVA adoption in China's new accounting standards (“2007GAAP”), reasons for differences from the International Accounting Standard Board's IFRS, and how 2007GAAP has been implemented in practice. Data are obtained from content analyses of IFRS and 2007GAAP FVA requirements, critical assessments of standard setters' official statements, and analyses of empirical evidence from official reports, media, and academic research. Findings – The authors find a high degree of adoption of IFRS FVA standards in China's 2007GAAP for financial instruments, but many differences for non-financial long-term asset investments. Standard setters justify this divergence by fundamental characteristics of the Chinese environment. The resulting differences from IFRS in the 2007GAAP FVA standards, and in their implementation, challenge official claims of “substantial convergence” between 2007GAAP and IFRS. Hence, the benefits desired by Chinese regulators from adopting FVA and international accounting convergence to IFRS may not be realized. Research limitations/implications – The findings are derived from aggregated data in government reports. These findings can be extended in future research by examining specific implementation outcomes in company financial statements. Originality/value – The paper contributes a timely critical examination of a major emerging economy's convergence with the controversial FVA requirements, which supports the IFRS's standing as a high quality set of accounting standards. The findings provide new insights into factors that can impede international accounting convergence in emerging economies.Accounting standards, China, Economic convergence, Economics, Fair value

Do audit clients successfully engage in opinion shopping? Partner-level evidence

This study investigates whether companies engage in audit opinion shopping activities by exerting influence over an audit firm\u27s decision to switch the engagement partner ("partner-level opinion shopping") in the Chinese setting, where the identities of engagement partners are publicly disclosed. Adopting the empirical framework developed by Lennox [2000], we show evidence that companies successfully engage in partner-level opinion shopping. Further, partner-level opinion shopping is more likely to be successful if a company is economically important to an audit firm, and it is less likely to be successful if the audit firm is formed as a partnership rather than a corporation. We also find that companies successfully engaging in partner-level opinion shopping exhibit significantly lower earnings quality. Finally, we directly compare audit records between incoming and outgoing partners and find that, for companies that successfully improve audit opinions after partner switching, incoming partners have a significantly higher propensity to issue clean opinions than their outgoing counterparts

Does Convergence of Accounting Standards Lead to the Convergence of Accounting Practices?: A Study from China

In this empirical study we examine whether China's efforts to converge domestic accounting standards with International Financial Reporting Standards (IFRS) over the past 15 years have resulted in the successful convergence of Chinese listed firms. This study is unique in that we evaluate convergence of firms' accounting practices from three perspectives: (1) the level of compliance with Chinese GAAP and IFRS, (2) the consistency of accounting choices under Chinese GAAP and IFRS, and (3) identification of significant differences in the net incomes produced under Chinese GAAP and IFRS (earnings gap). Using the 1999 and 2002 annual reports of 79 Chinese listed firms we find improvement in both compliance with IFRS and in the consistency of the accounting methods used in annual reports prepared under Chinese GAAP and IFRS. We also find a reduction in the earnings gap from 1999 to 2002. However, interestingly we observed that Chinese listed firms' compliance with IFRS is significantly lower than their compliance with Chinese GAAP. Overall we believe that our findings suggest that in China the convergence of accounting standards has been a conduit to the convergence of accounting practices.Accounting convergence Accounting regulations in China Capital markets in China Emerging markets

Continuous hydrogenolysis of acetal-stabilized lignin in flow

Using acetal-stabilized lignin we performed a truly steady state continuous high-yielding lignin depolymerization (45% monophenolics using Ni/C), which offered a window into challenges and opportunities that will be faced when processing this feedstock. With an excess of catalyst present, we observed stable depolymerization yields for 125 h time on stream. However, using catalyst loadings that were just sufficient to achieve initial maximum hydrogenolysis monomer yields revealed rapid catalyst deactivation. High yields could be partially recovered with high temperature regeneration under a reducing environment. Characterization of spent catalysts revealed that sintering and carbonaceaous deposits rather than leaching were the main phenomena causing deactivation