The Reliability Research Of GEM Company Revenue Recognition And Measurement

There has been a conspicuous attention on companies of the Growth Enterprise Market(GEM) since they are listed on the stock exchange in2009. At present, China’s GEM is inthe period of overall planning and gradually extending. It is a new-type of investment marketand investment products, and also a significant stage for the Small and Medium-SizedEnterprises (SMEs) to development. A certain proportion of investment risk and a greatproportion of return on investment both exist when investors When Investors go into GEM.As an inseparable part of the multi-level capital market system, the purpose of GEM is tocomplete the national strategy of independent innovation, and to promote the development ofSMEs. Therefore, there would be a big trial of outstanding achievements before the listing ofGEM companies. Amounts of unexpected conditions, which involve the verification, thecalculation and the reliability of income, would appear, such as vanishing the financialstatement, inflating profits, etc.Firstly, the author gives an introduction of the current situation, the development andthe risk of GEM in China. Attributing to China’s attending WTO, the enlargement of themain body of Chinese opening market, and the growth of listed companies, GEM companieshas been in the period of rapid development which lies in the perfection of them and theincreasing market competitions. As the backbone of China’s economic transformation anddevelopment, a higher standard is required to China’s GEM companies. Thus the reasonabledevelopment of accounting theories of GEM companies plays an important role in the fast,healthy, high quality of growth of China’s GEM. Meanwhile, oversea listed companies aresearching for more opportunities to share high quality resources of China.Secondly, revenue is not only a major element of accounting reports, but also animportant indicator to measure performances of GEM companies. The verification andcalculation of revenue are supposed to be wrapped with specialties of corresponding GEMcompanies. Even though current Chinese accounting theories has been relatively mature, thetheories on GEM still lack of overall and systematic studies. This defect leads to difficultiesto the revenue verification and calculation of GEM companies, limitations to operatingmanagement and internal controls, and restrictions to financial regulations of China. This paper not only focuses on the verification and calculation of revenue, but also thereliability of them. Features of different GEM companies vary a lot. A forecastinglyoutstanding achievement based on financial statements and information disclosure beforecome into the market sometimes would show profit decreasing. Therefore, the reliability ofverification and calculation, no matter in which step of come into the market, leaves much tobe desired. This sort of financial cheating would not only harm the interests of SMEs, butalso limit the reasonable competition between GEM companies and their growth. It is evenan irresponsible behavior to the social development. Since comprehensive accountingpractices and supportive accounting theories are still unsatisfying, there is an inevitable factthat an inconformity is between the verification and calculation of revenue and the reliabilityof them. Thus, a basic and comprehensive study on this reliability would perfect China’saccounting theories on GEM companies; settle a fix foundation to the legal system on riskreduction and preventing financial fraud of China’s GEM companies. This is not onlynecessary to the reformation of accounting theories, but also to the sustainable developmentof China’s GEM companies.