China will adopt International Financial Reporting Standards by Jan. 1, 2007, the country's minister of finance announced.
Speaking at a press conference, Jin Renqing said that the decision followed a 10-year review of China's financial industry and practices. All listed firms and registered accountants on the mainland will have to follow the standards, and government officials said that the hope is the regulations will facilitate the growth of the country's capital market. The rules will be phased in over a longer period for private companies.
IFRS is now used in almost 100 countries, including all of the European Union's member states. Several other countries in Asia, such as South Korea, are also considering making the switch.
China will adopt the principles of IFRS and implement its own code, to be called the "Chinese Accounting Standards System." Some changes will be necessary to make adoption of the standards feasible, such as an exemption for state enterprises from related-party disclosures, because of the dominance of government enterprises. The adoption will also introduce the concept of "fair value" into Chinese accounting.
