Statutory Requirements Compliance: Are You Ready for China?

  • by Qian Sharon Tang, System Program Manager
  • January 15, 2005
Prior to rolling out an R/3 system to China, a company needs to answer the question, "What statutory compliances does China require and how do I make sure the R/3 FI/CO implementation meets these requirements?" The author shares her experience from consulting on a dozen China rollouts in multiple industries, including two in 2004. She gives an overview of the requirements and how to meet them.
Key Concept
In January 2001, China's Ministry of Finance of China (MOF) established the Accounting System for Business Enterprises as part of its program for improving financial reporting by businesses. The system is based in part on the experience of MOF in implementing the Accounting System for Joint Stock Limited Enterprises, the existing individual Chinese accounting standards issued in the past few years, and the disclosure rules required by the China Securities and Regulatory Commission (CSRC).

Companies investing in China face the challenge of how to align strategies between the China branch and the rest of the corporation. The alignment and integration of application software is one of those operating strategies.

Complying with local statutory requirements is a major headache for international rollouts, especially in a country like China, which operates on vastly different social and political systems from the Western world. This continues to be the biggest area of concern for all FI/CO R/3 implementations in China.

What follows is the vital information on the statutory requirements of China's accounting system and the best practices about how you can use R/3 functions to meet these requirements. Compliance with these requirements will ensure the implemented R/3 accounting system is endorsed by the governance authorities in China.

I will describe how China's accounting regulations have evolved over the years; review the unique aspects of accounting standards, tax regulation, and audit requirements in China; highlight the differences and similarities among International Accounting Standards (IAS), US GAAP, and Chinese accounting standards; and provide insider tips on corresponding SAP R/3 solutions to address these statutory differences.

Although the information I provide here is up to date as of this writing, note that the Chinese government is constantly modifying, developing, and publishing new standards and regulations.

Qian Sharon Tang

Qian (Sharon) Tang is a system program manager who is responsible for the support and development of various areas of SAP systems. Prior to this, she was a senior FI/CO application consultant at SAP China. She has been working with SAP since 1995, with emphasis on FI/CO modules such as FI-GL/AR/AP/SPL, CO-CCA, CO-PC, CO-PA, CO-ML, EC-PCA, and cross-module integration between FI/CO and logistics. She also has experience with MM, SD, SM, and PP.

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