China is the ultimate destination for foreign investors because of its outstanding business environment, support from the government, and strategic location that guarantees rapid growth and success. The country’s economy has been growing at an average of 10% per annum, and you can count on this trend to thrust your company to success. To take advantage of this market, every company needs to adhere to all laws, policies, and standards set by the national and local administrations.
The most notable of the requirements is the company accounting standards. As we are going to see, China uses a different accounting standard compared to the International Financial Reporting Standards (IFRS), which is mainly employed by western countries. To get it right on accounting matters, the best approach is to use a professional accounting service in China. Keep reading to learn more about company accounting in China (and accounting services in Hong-Kong) and the benefits that come from outsourcing.
An Overview of the Chinese Accounting Standards
The rapid development of the Chinese economy has seen major changes embedded in different professions. In accounting, these changes are aimed at helping to improve the efficiency at the individual business level and leveraging China’s economic development. Instead of using the common International Financial Reporting Standards (IFRS), China works with its own model, Chinese Accounting Standards (CAS).
CAS is based on two main standards, which are dependent on the size of the business under consideration.
- The Chinese Accounting Standards for Business Enterprises (ASBES): The standards are prepared for application in large companies incorporated in China.
- Accounting Standards for Small Business Enterprises (ASSBEs): If you have a small or medium enterprise in China, the standard to use is ASSBEs.
These standards were first released in 2007 but have been improved over the years to near total convergence with the International Financial Reporting Standards (IFRS). They provide guidance for company accounting, allowing accountants to accurately present the status of their firms to the Chinese authorities. Therefore, it is important to ensure that your accountants appreciate how the standards are applied and stick to the rules.
One notable requirement in the CAS is the currency to be used in books of accounts. All Foreign Invested Enterprises (FICE) are required to use RMB, the local currency, as the base currency. Therefore, even if you use foreign currencies for reporting standard transactions, the balance sheets and other accounting-related work for inspection must be done in the RMB.
It is not uncommon to get accountants, especially those who are only conversant with the western standards, getting stuck with the application of the Chinese accounting standards. One of the best ways to get it right is to work with the best accounting service in China.
What are the Main Differences between CAS and IFRS?
Although China has tried to bridge its CAS with IFRS so much, the truth is that some differences are still notable. Here are some of the main differences that you should note.
- Methods of Valuation for Fixed Assets
The International Financial Reporting Standards (IFRS) allow accountants to select the preferred method of valuation for fixed assets. For example, you can use the revaluation strategy or historical core principle. However, CAS only allows the historical method of fixed asset valuation.
- CAS is More Detailed in Some Items that are Common in the Country
When dealing with some items considered common in the country, such as two firms controlled by the same company but with varying interests, CAS requires accountants to restate the comparative figure. However, IFRS does not provide rules for addressing such a scenario in its standards.
- Implementation of Updates is Delayed in CAS Compared to IFRS:
When new updates are released to the International Financial Reporting Standards (IFRS), perhaps requiring a new focus on sustainability, the Ministry of Finance (MOF) does not implement it immediately. Instead, the standards are reviewed before MOF makes the decision on whether they should be adopted. Indeed, it is not guaranteed that the new updates will be implemented. Therefore, it is a good idea to use a good accounting service in China for assurance of working with the right version of the recommended standards.
The Benefits of Using Professional Accounting Service in China
Whether your company is new or has been in operation for some time, we must say that accounting can be pretty complicated. With the competitive nature of the Chinese market, it is important to direct every effort into activities that can help to drive revenue and leave the accounting work to experts. So, here are the main benefits to anticipate for using an agency of experts to do the accounting works for your company:
- Helps to Cut Down Accounting-related Costs
To run a full in-house accounting team can be pretty expensive. You have to recruit expert accountants, and acquire and maintain the latest accounting software, which does not come cheap. You can forgo all of these costs by working with Primasia, the best accounting firm.
- Assistance in Drawing Excellent Strategies
The good thing about our accounting experts is that they have helped other top-rated companies and can easily tell you which strategies work and those that do not. After reviewing your books, whether preparing internal audits or dealing with taxation matters, it will be easy for them to determine the correct financial status of the company. They can also come in handy in helping you enrich strategies for growth.
- Guarantee for Data Security
How secure is your company’s data when working with in-house teams? One might be tempted to think that it is 100% secure, but the risks of getting compromised always loom. If one member of the team gives access to third parties or moves to a new organization, your entire system can easily get compromised. So, it is time to upgrade and work with the best accounting service in China, like Primasia, for better data security.
Experts at Primasia use advanced software that comes with security guarantees. In addition, the agency uses multiple layers of security to ensure that no piece of information from your company gets at risk. Some of the features used to guarantee utmost data security include:
- Only the vetted and approved accountants can access the database to do different accounting work.
- Each approved accountant works with specific access restrictions with passwords and usernames to ensure that only secure locations are used to access user data.
- The accounting systems use multi-factor authentication to reduce access by third parties.
- The accounting software used by experts comes with regular updates and support to ensure all security features are working optimally.
- Scaling Accounting is Pretty Easy
If you are scaling company operations, such as opening new branches in neighboring markets, improving the product design, or creating new structures, the truth is that a lot of work is involved. In such instances, adding the burden of accounting tasks to the business management team can lag the growth. Instead, you should work with an agency of experts to handle the accounting work as you concentrate on the core tasks that can help to drive revenue growth.
Primasia, the Ultimate Agency for Accounting Service in China
The benefits we have listed in this post are only a few of what you should anticipate. When you work with the best agency, such as Primasia, the benefits will be way more. For example, Primasia accounting experts will also guarantee to help you save time, guarantee compliance with Chinese Accounting Standards (CAS), and easy fraud detection.
Primasia was developed to help companies to understand their true positions and reinvigorate operations with the right strategies for success. The lovely thing about the agency is that it has a lot more to offer your company. You can also count on us to help your company with:
- Payroll management.
- Tax matters.
- Company incorporation.
When you open a company in China, the primary aim is seeing it become successful, and Primasia can hold your hand. Our accounting experts have been in the Chinese market for years and will be there to set your company on the road to success. Talk to us now for all the accounting services that you need for your company in China.