Financial disclosure and accounting harmonization: Cases of three listed companies in China

This paper presents a comparative study of the financial reporting practices of three Chinese companies listed simultaneously in Mainland China (A-shares) and Hong Kong (H-shares). Their financial statements, prepared based on the accounting and disclosure regulations in China and Hong Kong (or International Accounting Standards, IASs) over the period of 1995-1998 were studied, including an examination of their corporate structures, and vertical and horizontal comparisons of their primary accounting numbers and key financial ratios. This study demonstrates that significant discrepancies exist for financial information disclosed in terms of Chinese GAAP, Hong Kong GAAP or IASs. In addition, there are notable deviations in financial disclosures among the three companies. The study findings confirm the existence of a substantial gap between the Chinese practices of corporate accounting and financial reporting and the internationally accepted norms. It is suggested that there is an urgent need to promote internationalization of Chinese accounting and improve the understandability and comparability of financial statements released by Chinese listed companies in order to enhance their relevance and usefulness for decision-making by domestic and overseas investors.