Major Favtors Essay Example | Topics and Well Written Essays - 500 words

Major Favtors - Essay Example In that case, the accounting practices in China focus on both the fair presentation of financial position and a conservative presentation. The reason behind a fair presentation is to meet the various needs and requirements of the stakeholders and the capital market. The conservative approach is targeting the banking sector, which has a direct access to financial information (Central Intelligence Agency). (b): Legal system – the legal system in China is coded. Coded laws seek to, exhaustively, envelop the existing laws and preserve their implication to match that of the time it was coded. For this reason, the Chinese accounting practices are highly, rigid, prescriptive, detailed and procedural. This kind of legal system requires that the national law regulate the accounting practices. For that reason, China engages in the preparation of two sets of financial statement. That is, the rigid and the adaptive type, to comply with different types of legal systems (Central Intelligence Agency). (c): Taxation – the system is linked to reflect the legal system. In China, the national laws regulate the taxation practices. In this case, the accounting and the taxation process are the same (International Federation of Accountants). (d): Political and economic ties - the basis of accounting practices is influenced by the external forces due to international relations. China has strong political and economic ties with Japan, whose legal system is codified. The ties have greatly influenced China’s financial reporting regime (International Federation of Accountants). (e): Inflation – the changes in the rate of inflation affect the commodity prices in countries. The financial figures should reflect the level of inflation in a country. However, in countries with a low rate of inflation, like China, the reported accounting figures rarely reflect the rate of inflation (Central Intelligence Agency). (f): Level of economic development – the economic development in