Costing Methodologies and Cost Management Practices in China
Has the adoption of the 2006 Accounting System for Business Enterprises (ASBEs) by the People’s Republic of China resulted in the convergence of Chinese accounting standards with International Financial Reporting Standards (IFRS)?
This report presents the results of an IMA study with the assistance of the Ministry of Commerce of the People’s Republic of China to:
- Compare international and Chinese accounting policies, procedures, and methods;
- Examine both the regulations and the actual practices companies follow;
- Evaluate the extent to which Chinese cost management systems are influenced by open market economy practices vs. more planned economy practices; and
- Investigate whether Chinese costing practices contribute to product dumping by Chinese companies.
- Adoption of the 2006 ASBEs have begun to address the prior inappropriate treatment of specific cost items:
- While costing practice differences exist between Chinese companies and Western companies, a convergence of practice is in process.
- Most Chinese companies follow traditional methods for allocating costs to products, although the use of more accurate costing techniques is emerging.
- Costing issues can arise from differences: a) Between how Chinese and Western companies treat the various types of costs. b) In how costs are allocated to products.