An empirical evaluation of the new system of business accounting in China

The Chinese government introduced a new system of business accounting in 1993. The new system departs substantially from previous accounting systems dominated by rule-based accounting regulations, and is characterized by the adoption of accounting standards in China. Accounting Standards for Business Enterprises and thirteen new industry-specific accounting regulations (systems) have been enacted since then. Efforts continue to formulate and enforce a set of more detailed “practical accounting standards.” Significant changes have thus taken place in Chinese accounting.

This paper reports the results of a survey study to evaluate the effects of the new accounting system. The study results reveal that the stakeholders of business accounting in China (including users and providers of accounting information) generally agreed that the new accounting system has led to substantial improvement in the understandability, comparability, and decision usefulness of accounting information produced by Chinese enterprises. However, they are strongly supportive of further adoption of the internationally accepted accounting principles and procedures in Chinese accounting. In addition, this study demonstrates the respondents’ support for reducing “free choice” of accounting alternatives in accounting standards and their perception of the optimal model of accounting standard setting and enforcement in the context of business conditions in China.