【09.12.30 纽约时报】Hong Kong Prepares to Accept Chinese Accounting Standards

青蛙小王子

http://www.nytimes.com/2009/12/31/business/global/31account.html?ref=asia

HONG KONG — Hong Kong acceptance of Chinese accounting standards would be an important advance in Beijing’s drive to globalize its financial sector, but it could also challenge international investors with reports prepared by an industry prone to scandal.
Under a proposed rule change likely to take effect next year, the Hong Kong stock exchange would let locally listed Chinese companies file reports using their home accounting standards. The proposal is designed to reduce costs and keep Hong Kong competitive with Shanghai.
But concerns about supervision of Chinese auditors have led to delays, making it unlikely that the exchange will meet its Jan. 1 target date for implementing the change.
The change would also lead to different results in Hong Kong and China for certain industries, like insurance, although those differences would be expected to fade over time as standards converged.
“There is a confidence issue,” said Judy Wong, president of the Association of Chartered Certified Accountants Hong Kong, a group whose members stand to lose substantial business to lower-cost Chinese accounting firms under the rule change.
The Chinese Ministry of Finance “should let the public know how they vet the applications from mainland accounting and audit firms and what are the criteria,” she said, adding that the accountants’ association agreed with the proposal’s direction but contended that issues needed to be resolved.
The unification of standards would let Chinese companies whose shares trade in Hong Kong, known in the city as H-shares, post a single set of results for each reporting period identical to the reports they put out for their China-listed shares.
Most Hong Kong-listed Chinese companies are expected to use their home standards for their Hong Kong reports once the move has become official, both as a money-saving measure and to reduce confusion that often occurs because of differences in the reports released in China and Hong Kong.
Insurance companies like China Life and Ping An Insurance now see some of the greatest variations because of different treatment of investment gains and losses. Others, like banks, airlines and resource companies, would see little or no change.
Investors do not expect any big effect on stock prices from the accounting change.
Patrick Yiu, a fund manager at Cash Asset Management in Hong Kong, said that he would not change his investment strategy after the new accounting standards had been adopted and that the move should be welcomed by the broader market.
“Though there is some concern over discipline among auditors in the mainland, I don’t think it will be a major issue, and many major Chinese enterprises will do their best to disclose the most useful information to their investors,” he said.
The Hong Kong proposal testifies to the growing importance of China for international investors, who are increasingly looking at a steady Hong Kong that is likely to top global fund-raising through initial public offerings this year at $30 billion, thanks to a strong influx of new China listings. It could raise another $48 billion next year, even as Shanghai takes over the top spot with $56 billion in new offerings, according to forecasts by Ernst & Young.
Mainland accounting firms that prepare reports under Chinese standards charge about one-third what their Hong Kong counterparts do, making them more attractive in terms of price.
But any cost gains could easily be offset by an industry where book-cooking scandals were so common less than a decade ago that they led a former prime minister, Zhu Rongji, to call fraudulent accounting a “malignant tumor” that threatened the country’s economy.
To help minimize that risk, under the proposal it is now considering, Hong Kong would allow in only Chinese auditors who have passed muster with China’s Finance Ministry and the securities regulator, the China Securities Regulatory Commission.
Other checks and balances are also being discussed.
“We expect it will come up with a list; it should not be more than five firms,” said Jack Chow, a partner based in Hong Kong at the global accounting firm KPMG.
That list is expected to include domestic leaders like RSM China, Shinewing Certified Public Accountants and BDO China Shu Lun Pan C.P.A.’s, with future approvals expected to follow.
Hong Kong’s move is also seen as an acknowledgement that Chinese accounting standards are rapidly converging with international standards.
One major difference that remains between Chinese and international standards is accounting for asset impairment, which is responsible for some of the big differences in results for investment-oriented firms like insurers.
China’s standards do not allow for the reversal of asset impairment if initial provisions later turn out to have been overstated. But international accounting does allow for such reversal.
The Chinese are now working with their international counterparts to resolve that difference, said Chris Joy, executive director of Hong Kong Institute of Certified Public Accountants.
“If convergence doesn’t continue and if standards start to diverge, effectively the stock exchange’s proposal will fall aside,” he said.