×

Accounting and bookkeeping

Businesses operating in China are required to follow the Chinese Accounting Standards (CAS), also known as the Chinese Generally Accepted Accounting Principles (GAAP). The CAS framework is based on two standards:

  • Accounting Standards for Business Enterprises (ASBEs); and
  • Accounting Standards for Small Business Enterprises (ASSBEs).

The current ASBEs were released in 2006 and came into force in January 2007. It is widely viewed by the international community that ASBEs are now substantially converged with IFRS, with only some minor discrepancies in wording. Starting January 1, 2021, several new accounting standards will apply to all entities that have adopted the CAS. The changes will mainly pertain to accounting treatment of revenue and leases.

RMB is the base currency for ledgers and financial reports. For enterprises using currencies other than RMB in their business transactions, foreign currencies can be used as the bookkeeping base currency; however, financial reports are required to be shown in RMB. Furthermore, accounting records must be maintained in Chinese. FIEs can choose to use only Chinese or a combination of Chinese and a foreign language.

Enterprises in China should adopt the accrual basis of accounting in performing recognition, measurement, and reporting for accounting purposes. FIEs, including their legally responsible persons, must take full responsibility for the truthfulness, legitimacy, and completeness of financial statements. These statements will be used for computing the FIE’s taxable and distributable profit.

Books and records have to be retained for at least 10 years under Chinese law. By law, any business transactions carried out in mainland China require a fapiao. In practice, a significant portion of small to medium-sized companies conduct certain sales under the table out of reluctance to part with their fapiao. This is because for each fapiao issued, tax will be payable on the profit from the transaction. For purchasing goods and services, receiving fapiao from the seller is essential for claiming VAT refunds and lowering one’s tax liability.

Download this guide on PDF

Find Other Guides and Magazines:

magazines

Your Insights & Resources Library for Asia

Asiapedia is a collection of resources based on what we have learned about doing business in Asia. It’s the product of more than 300 team members collaborating across 28 offices in Asia, Europe, and North America.

or
Back to top