Research On The Accounting And Disclosure Of Government Grants Of Chinese Listed Companies

The famous school of economics led by Keynes and neo-Keynesianists such as Samuelson believes that government should interfere with the market in order to maintain a healthy and balanced economy. With the lurking impact of the global financial crisis still bothering countries cross the world, national governments have been playing an essential role in coping with crisis and stimulating economic growth. In China where the socialist market economy is dominated by state-owned enterprises, government grants are one of the direct ways for the government to participate in and oversee the running of the economy. Moreover, government grants have had huge influence on the disclosure of Chinese listed companies due to their special nature and large volume. Therefore, study on the accounting and disclosure of government grants is believed to be of considerable importance.As for the theoretical study part, main ideas of relevant research papers will be briefly covered, and then accounting theories and accounting standards regarding government grants will be summarized and compared. Major accounting theories include the capital vs. income approaches, the gross amount vs. net amount approaches, the fair value vs. nominal value approaches and the accrual vs. cash basis approaches etc. The main points, pros&cons, preferences in accounting standards and practice of these theories will be covered. Then, two accounting standards, China Accounting Standards for Enterprises No.16:Government Grants and International Accounting Standards No.20:Accounting for Government Grants and Disclosure of Government Assistance are discussed and compared, followed by an outlook of future trends of these standards.As for the practical study part, in order to have a basic view of the status of the accounting and disclosure of government grants by Chinese listed companies, the top25companies with the largest amounts of government grants included in profits in their2011annual reports were selected and analyzed. Key insights such as the characteristics, forms, industrial®ional distribution, accounting and disclosure practice of government grants will be provided. Based on these observations, a number of hot and difficult issues in practice will be discussed, including vague concept of government grants, difficulty in distinguishing asset-related grants from income-related grants, divergence in recognition and measurement, and inadequate disclosure of government grants etc. Finally, suggestions as how to solve these problems are provided from the perspectives of both the companies and the authorities, in the hope of improving the accounting and disclosure of government grants by Chinese listed companies.