1. Chief Accountant, China Securities Regulatory Commission
Current Status and Challenges of Adopting the New Chinese Accounting Standards for Business Enterprises (“CAS”)
Zhong Hui Zhou
Chief Accountant, China Securities Regulatory Commission

2. Background, Framework and Comparison with IFRS
Contents
Background, Framework and Comparison with IFRS
First-time adoption of CAS
Issues encountered on first-time adoption
Challenges in adopting CAS
Recent activities
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3. I A. Background of CAS Adoption
Integration with the global economy
Development of domestic economy
Strengthen market supervision
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4. I B. Framework of CAS First level: Basic Standard
Second level: Specific Standards (38)
Third level: Application Guidance (32)
The three levels within the hierarchy above form separate yet inter-related system that is fully integrated
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5. Hierarchy of CAS CAS: Basic Standard Specific Standards and
Application Guidance
Interpretations (being formulated)
IFRS:
Framework
IFRSs
Interpretations
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6. C. Comparison with IFRS 1. Substantive convergence
On 8 November 2005, Mr Wang Jun, Vice-Minister of Finance, and Sir David Tweedie, Chairman of International Accounting Standards Board (IASB), signed a joint statement, confirming the achievement of substantive convergence of CAS with International Financial Reporting Standards.
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7. 2.Principles of convergence: progress and development trend
C. Comparison with IFRS
2.Principles of convergence:
progress and development trend
does not mean simple equivalence
process
interactive
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8. C. Comparison with IFRS 3. Remaining differences
A limited number of differences remained
Disclosure of related party relationships and transactions
Reversal of provisions for impairment of long-term assets
Relevant rules are not the same
Business combinations between parties under common control
Extraction of Petroleum and Natural Gas, Insurance and Re-insurance contracts
Measurement of fair value
Non-current assets held for sale and discontinued operations
Accounting of post employment or post retirement benefits
Accounting in hyperinflationary economies
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9. II. First-time adoption of CAS
A. Initial preparation for first-time adoption
1.Training
2.Field study
3.Preparation by enterprises
4.Driving the implementation of CAS
B. Impact of first-time adoption
C. Responses to matters arising during first-time adoption
D. Critical success factors
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10. A. Initial preparation – training
Standard setters, regulators and the entire profession took part in training:
Ministry of Finance (MOF) and Accounting Society of China (ASC)
China Securities Regulatory Commission (CSRC)
Chinese Institute of Certified Public Accountants (CICPA)
CPA firms
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11. A. Initial preparation – Field Study
CSRC
29 listed companies selected for simulation
Discussions held with financial personnel and audit firms
Potential issues identified and analyzed
Solutions formulated for some
Other issues reflected with the MoF
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12. A. Initial preparation – Preparation by enterprises
Information system
Process for preparation of financial statements
Management framework
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13. A. Initial preparation – Driving the implementation of CAS
Other Driving Efforts Behind Implementing New CAS:
Communication with the public
24 Significant State-owned enterprises piloted
On-going discussion with the State Administration of Taxation (SAT)
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14. B. Impact of first-time adoption
2006 annual reports of 1,457 listed companies examined:
A net increase of Rmb billion ( 0.43%) in shareholders’ equity
46% of respondents has less than 1% change in shareholder’s equity
Items that have the most significant impact:
Increase -> Financial Assets carried at FV
Decrease -> Goodwill
Most pervasive -> Income taxes
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15. C. Responses to matters arising during the first-time adoption
MoF - Team of Experts on Implementation Issues of CAS –
Issued 2 expert opinions on 20+ issues
Accounting Department of CSRC –
Issuance of guiding opinions
Simulation performed on 29 listed companies
CSRC –
Revised 17 standards on information disclosures
Guidance on preparation of 2007 annual report
Stock Exchanges –
Issued 9 working memos
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16. D. Critical Success Factors
National wide training and public communication;
Cooperation and coordination between various government authorities;
Listening to concerns of preparers and users and react quickly by providing necessary guideline and interpretations
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17. III. Issues encountered on first-time adoption
Business combinations under common control
Classification, measurement and disclosures of financial instruments
Capitalization of development costs in the pharmaceutical and software development industries
Share-based payment
Asset impairment testing
Valuation technique used in the measurement of fair values
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18. IV. Challenges in adopting CAS
Accounting concept and application of professional judgment
Bringing principles to practice
International convergence
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19. IV. Challenges — concept and judgement
Accounting concept
From complying specific rules to professional judgment based on principles
Professional judgment, e.g.:
（1）Measurement of fair value
（2）Impairment provisions
（3）Financial instruments
（4）Endowment and post-retirement and post-employment benefits
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20. IV. Challenges — bring principles to practice
Massive education and training needs
Improvements in internal management systems
Changes in performance measurement indices
Reconciliation with tax policies
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21. IV. Challenges — international convergence
CAS achieved substantive convergence with IFRS
However, IFRS may continue to change due to:
Convergence with US GAAP;
Accommodating the real economic needs of EU etc.
CAS responds to challenges brought by changes in IFRS
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22. V. Recent activities A. Plan to issue implementation guidance
MoF: Interpretations
CSRC: Accounting Principles Bulletins
B. Investigate and analyze based on 2007 semi-annual report
In the works
C. Guidance on preparation of 2007 annual reports
Plan to issue, along with SZSE and SSE, relevant guidance according to 2007 semi-annual report
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23. Thank You