Companies get set for new accounting rules
By Zhang Yu (China Daily)Updated: 2007-01-04 10:25
The new rules require banks to adopt a unified accounting approach that registers all business operations in terms of one specific currency. They will drop the old separate accounting system, which recorded business operations in terms of the original foreign currency and converted the sum total into renminbi.
The complicated change has required a great deal of preparation and resources to adjust the existing separate accounting and calculation system.
A source familiar with the banking industry said BOC and CCB filed an application to the MOF early last year, asking it to postpone unified accounting "due to the huge cost of altering the system".
The MOF responded in its November 6 corporate accounting guidelines. It said financial institutions that frequently deal with foreign currencies can adopt separate accounting in their daily registrations, but the final calculation of the sum total must accord with the results under unified accounting.
This means foreign exchange gains or losses will have to be recorded in a profit statement instead of a balance sheet as before. "It makes the financial statement more reliable and limits the possibility of companies manipulating profit," said Cao.
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