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Tel：+86 400 118 5939Due to the implementation of the "One Country, Two Systems" policy between Hong Kong and the mainland, there are certain differences in macro aspects such as accounting market environment, accounting regulation, and micro aspects such as taxation between the mainland and Hong Kong, resulting in differences in accounting standards between the mainland and Hong Kong. Here we will systematically analyze and explore the differences between Hong Kong accounting standards and mainland accounting standards?
1. Hong Kong accounting standards emphasize the use of fair value, while mainland accounting standards place greater emphasis on book value
Hong Kong accounting standards, like international accounting standards, emphasize the use of fair value in asset valuation, especially in asset transactions. According to the current accounting system and issued accounting standards in mainland China, the book value is basically used as the basis for asset valuation, and this difference is highlighted in the treatment of investments and non monetary transactions.
2. In terms of the provision for asset impairment, although both accounting standards in the two places stipulate the provision for asset impairment, the specific provisions are different
The regulations in mainland China are more specific, such as provisions for specific situations where inventory cannot be fully provisioned for impairment. The regulations in Hong Kong are relatively more principled, and the application of individual recognition methods in determining asset impairment is more common, emphasizing the professional judgment of companies and accountants.
3. All focus on handling related party transactions, but the emphasis varies from one to another
The mainland places greater emphasis on preventing companies from manipulating profits through related party transactions, therefore, the accounting treatment regulations for transactions such as selling assets between related parties are stricter. Hong Kong accounting standards emphasize full disclosure of related parties and their transactions.
Overall, there is not a significant difference in accounting standards between mainland China and Hong Kong. The main reasons for this difference are as follows:
1. The legal systems of the two are different
Mainland China leans towards the mainland legal system, while Hong Kong leans towards the Anglo American legal system. The mainland has incorporated accounting into its legal system for regulation, and one of the characteristics of written law is that "no crime is committed without explicit provisions of the law". This is an important reason why the accounting standards and systems in mainland China are parallel, and the accounting treatment methods for various matters are stipulated in detail. Hong Kong believes that "accounting is not a law but a mixture of art and science", and has not incorporated accounting into the legal system. Instead, it is regulated by accounting standards and generally accepted accounting principles, placing greater emphasis on the fairness and authenticity of accounting information. Therefore, it places more emphasis on relying on the professional judgment of companies and accountants.
2. The impact of tax laws on the two is different
Due to the mainland's preference for a written legal system, its accounting principles and accounting system are deeply influenced by laws, and the government intervenes heavily in enterprises. The financial accounting and tax accounting of enterprises are combined, and tax laws have a significant impact on accounting. When formulating accounting standards, the impact on national taxation must be considered. Due to being a common law region, certain items in Hong Kong are classified as expenses for tax purposes, and they are generally listed as expenses in the financial statements, with their income statement being the taxable income statement. So the impact of tax laws on accounting is relatively small.
3. Different levels of economic development
Hong Kong is already a relatively mature and developed market economy, with the principles of fairness, openness, transparency, and integrity deeply ingrained in people's hearts. Price signals can reflect the essence of the economy in a flexible and timely manner. Therefore, the concept of fair value is widely used in accounting treatment in Hong Kong. The mainland market economy is far from mature. There are many economic phenomena unique to the transition period in economic life, and price signals are often distorted, failing to truly reflect the essence of the economy. In this economic environment, if the concept of fair value is widely used, it will inevitably bring great profit manipulation space to enterprises. Therefore, mainland standards would rather sacrifice some fairness and emphasize the authenticity of information.
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