China New Accounting Standards 2021
Chinese enterprises will be required to adopt several revised accounting standards starting from January 2021. These revised standards concern mainly the recognition of revenue (“new CAS 14”) and the treatment of the financial leases in the financial statements. Enterprises which are listed in the stock markets and those adopting International Financial Reporting Standards (IFRS) have already implemented these standards in previous years. From January 1st, 2021, these standards will be extended to all the enterprises in China which must adopt the Chinese Accounting Standards for Business Enterprises.
New CAS 14 Revenue
On July 5th, 2017, the Ministry of Finance issued the “Notice on Revising and Issuing the Accounting Standards for Business Enterprises No. 14 Revenue”, to be implemented from January 1st, 2018 by enterprises listed in China and abroad or those adopting the IFRS for their financial statements, from January 1st, 2020 by enterprises listed in China, and from January 1st, 2021 by other companies adopting the Accounting Standards for Business Enterprises.
The New CAS 14 reforms the existing revenue recognition model, highlighting that the main criterion for the revenue recognition shall be the fulfilment of the obligations deriving from a contract and that the revenue shall be recognised when the client obtains control of the relevant goods or service.
Enterprises operating in China, particularly the subsidiaries of foreign investors, shall consider the changes deriving from the introduction of the revised accounting standards and prepare to be in line with the new requirements.
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