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IOVERVIEW Todays accounting in China is strikingly different from 30 years ago In western countries there appeared to have been relatively little interest in the accounting system used in China before the 1970s Zhou 1988 The language barrier and differences in culture may have contributed to this lack of interest but other factors include the low level of participation and involvement in the world economy in the pre-reform communist regime Before China changed its policy to accept foreign investment in the 1978 there had been little need to know about how accounting information was produced or used by Chinese companies It was well known that Chinese companies had been following an accounting system based on the Soviet Unions system of uniform accounting that was designed for a state-owned centrally-planned socialist economy The general impression was that the form and purpose of the Chinese accounting system were different from accounting practice typically used in most other countries Davidson 1996 Since the introduction of the Open-Door policy for trade and investment in 1978 there has been a dramatic increase in the amount of international trade and foreign investment Chinas centrally-planned and controlled economy has been transformed to a market-oriented economy with a socialist characteristic The Ministry of Finance MOF realized that dramatic changes would also be needed in the accounting system to conform to or indeed even to allow the new economic system to work The basic function of accounting information shifted from implementing macroeconomic planning and safeguarding national assets to decision making by enterprise management and external markets Chinas accounting system is currently undergoing a complete revision as a result of a decision to adopt business practices used in international accounting practice In 1992 China promulgated its first accounting standard draft called the Basic Accounting Standard It was built on the concepts and characteristics adopted by IASC FASB and other national standard setter In February 1993 the Ministry of Finance of China started another
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