US and China Accounting Dissected Do You Know These Key Points?

Key Differences Between Chinese and American Accounting What You Need to Know?

The accounting standards and practices in China and the United States differ significantly, influencing not only corporate financial reporting but also having a profound impact on the management of multinational companies and investor decision-making. In recent years, as globalization has accelerated, an increasing number of businesses have begun operating in both countries. Therefore, understanding the differences between the Chinese and American accounting systems is particularly important.

Firstly, the foundation of the two accounting standards differs. The U.S. adopts International Financial Reporting Standards IFRS, while China uses Chinese Accounting Standards CAS. IFRS is formulated by the International Accounting Standards Board IASB with the aim of providing a globally accepted accounting language. In contrast, although China's accounting standards draw on international norms, they still retain some uniquely Chinese regulations. For instance, regarding revenue recognition, IFRS emphasizes the control transfer model, whereas CAS focuses more on the principle of risk and reward transfer. This difference can lead to different financial outcomes when handling certain transactions for companies in both countries.

Secondly, the requirements for information disclosure vary. In the U.S., listed companies must comply with strict disclosure requirements, including submitting quarterly and annual reports regularly and providing detailed financial information to the public. The Securities and Exchange Commission SEC also conducts independent audits of company financial statements to ensure their authenticity and accuracy. In China, although there are similar regulatory bodies like the China Securities Regulatory Commission CSRC, there may be some flexibility in actual implementation. For example, the disclosure requirements for non-core business information are relatively relaxed, which may affect investors' comprehensive understanding of a company's status.

Moreover, differences in tax processing are another major characteristic of accounting between the two countries. In the U.S., the corporate income tax rate is lower, and companies are allowed to deduct costs and expenses in various ways; whereas in China, despite continuous tax reduction and fee reduction policies in recent years, the overall tax rate level remains higher. There are also differences between the two countries in the tax treatment of RD expenditures, advertising promotions, etc. For example, in the U.S., qualified RD expenditures can enjoy tax relief benefits; whereas in China, such preferential treatments require meeting specific conditions. These differences undoubtedly have a direct impact on a company's profit levels and cash flow management.

It is worth noting that as the trend of global economic integration strengthens, cooperation between China and the U.S. in the accounting field is becoming increasingly close. For example, in April 2025, the Public Company Accounting Oversight Board PCAOB of the United States and the Ministry of Finance of China reached a consensus on cross-border audit supervision cooperation, taking an important step toward resolving long-standing differences. This progress not only helps enhance transparency in capital markets in both regions but also provides valuable experience for other economies.

In summary, the main differences between the Chinese and American accounting systems lie in the basic framework, information disclosure, and tax processing. For Chinese enterprises hoping to enter or already operating in the Chinese and American markets, it is crucial to fully understand and adapt to these differences. Only in this way can they better avoid potential risks, seize development opportunities, and stand out in fierce international competition. At the same time, we look forward to further deepening exchanges and cooperation between China and the U.S. in more fields, jointly promoting the development and progress of the global accounting cause.