Cultural and economic influences on current accounting standards in the People's Republic of China

Accounting Principles in the People's Republic of China have undergone dramatic reform since the 1970s. In moving toward a more market driven economy, the market structures and accounting rules have changed to the point that today many of the concepts and principles familiar in the most advanced economies are part of the Chinese regulations and laws. While China has forged many principles that are similar to Western and international practice, there are anomalies that may not be easily explained without a more detailed understanding of the cultural, economic and political environment now facing China. The principle of Guo Qing implies that change will be implemented only in conjunction with Chinese needs. As evidenced in the statutory restrictions on the value of certain contributed intangibles, the write-offs of accounts receivable and the discretionary write-downs of inventory for lower-of-cost-or-market considerations, there remain some areas of accounting practice that Chinese historical, cultural, and economic circumstances encourage an inexplicable result. Additionally, there remain differences in perspective that are more attributable to history than to specific accounting rules.