Study On Consolidated Financial Statement' Problems In China

In 1992 the Financial Ministry of China promulgated Guideline for Enterprises' Accounting, which requires enterprises to compile a consolidated accounting statement for each investment they make. Since then a pressing question appears: how to correctly make a consolidated accounting statement to give an authentic and objective reflection of the whole enterprise's business. The rapid development of China's modern economy, the accelerating development of domestic enterprises toward a large group and an international corporation, and the increasingly complex mode of capital operation, all these tendencies have highlighted the poor reliability comprehensibility of the accounting information in China's consolidated accounting statement.In view of such a background and based on plenty of data collected and personal work experiences, the author analyzes, by comparison and contrast, the problems with the current enforcement of the regulations on consolidated accounting statement in China in terms of two aspects: "consolidation price gap" project, and "determination of consolidation scope." From these two perspectives, the author compares China's current accounting rules with international accounting rules and the accounting mode of main Western countries, and also with Enterprises' Accounting Rules No. 33 — Consolidated Accounting Statement (New Rules) issued on February 15, 2006. After such comparison the author concludes that New Rules represent a marked improvement of China's regulation on consolidated accounting statement and a step forward to international practice, but there still exist many aspects that need further improving or should be paid attention to in future execution of the Rules. In particular, the author proposes, by reference to actual cases, a revision to the regulation on enterprise group's internal equity investment used to offset gap and on determination of consolidation scope.