International investing is a diverse market and can have rewarding returns. It allows you to expand your products to new consumers. However, when entering new territories, one must be aware of the differences in regulations.
Diverse markets such as China have a different way of doing things, especially when it comes to accounting. If they don’t keep proper records of transactions, businesses are guaranteed to suffer. This can also result in the organization facing trouble from local taxation authorities
Read on to find out the major differences between Chinese Accounting Standard and Generally Accepted Accounting Standards:
Chinese Accounting Standards Framework:
The Chinese Accounting Standard (CAS) is similar to the International Financial Reporting Standards (IFRS) that are used globally. However, there are some particulars that have to be followed when operating a business under CAS. The first thing to keep in mind is that the CAS has three different standards in its framework
Accounting Standards for Business Enterprises (ASBE)
Accounting Standards for Small Business Enterprises (ASSBE)
Accounting Standards for Financial Enterprises (ASFE)
Normally, businesses operate under ASBE, which is more similar to US GAAP and IFRS.
CAS restrictions compared to GAAP:
CAS can be a bit restrictive. For example, the valuation of fixed assets can only be done based on their historical costs. This means that re-evaluation of assets is not allowed. On the other hand, in some instances, GAAP allows the re-evaluation of assets. Similarly the assessment of accounts compliance
for every company must be done by a CPA (Certified Public accountant) from a reliable China accounting audit annually. They are responsible for reporting to the local MOF authorities. This earns the company a higher grade of trust.
Employee regulations under CAS:
Employee benefits under CAS
are also limited to company stocks. This can create confusion when a multinational attempts to open a Chinese subsidiary. In addition to that, each employee from both management and staff is liable to pay Individual Income Tax (IIT). The contracts to every worker are supposed to be detailed, written in Chinese and stamped. The GAAP is very flexible with employee contracts and does not require stamping from any authority.
CAS taxation filing requirements:
The filing of tax returns and financial statements is done on a monthly base under CAS. This is significantly different from GAAP, where the returns can be filed on a quarterly or Bi-monthly basis. The Corporate Income Tax (CIT) can be filled on a quarterly base which is similar to IRF and GAAP.
CAS can be a bit confusing for some foreign investors due to its many rules and regulations. Not only that, the rules can differ from city to city. Therefore, it is better for a new investor to hire a consultancy firm
. They have experts in CAS and can help with getting the compliance with minimum hassle.
Business China has comprehensive packages
which include accountancy compliance, business registrations, and opening bank accounts in China. They are experts in investment management and have access to the corporate registry of China. Call us today
for starting your journey towards the investment landscape of the Orient.