The US-based Institute of
Management Accountants (IMA) has released a report on a two-year
study that sought to understand the development of Chinese
accounting standards and accounting systems, as well as the cost
accounting system and cost management practices of Chinese

Costing Methodologies and Cost Management Practices in the
Peoples’ Republic of China
reviewed the costing practices of
more than 200 Chinese state-owned enterprises, listed companies and
privately-owned companies. It was conducted by the IMA with
assistance from the Ministry of Commerce of China.

Conclusions drawn about the finance and accounting function
included that the role of the accounting department under China’s
state-managed economy was generally limited to the bookkeeping
function. However, most Chinese companies had evolved their finance
and accounting departments to reflect the greater role and
responsibilities prevalent in similar departments in the West.

The IMA concluded that, as in the West, continued efforts are
needed by most companies to have these departments fulfil their
potential and become part of the strategic management team of their

Key findings relating to product costing included that China’s
adoption of Accounting System for Business Enterprises (ASBE) in
2006 brought external financial reporting by Chinese companies
closer to international standards. The report noted that while
differences remain between the costing practices of Chinese and
Western companies, a convergence of practice is in process. ASBE
also corrected some of the instances where cost items had been
inappropriately treated according to Chinese accounting

The report found the cost management systems of many Chinese
companies reflect the planning and control systems previously used
under the state-managed economy. However, it noted many practices
employed under the planned economy were similar to those practiced
by companies in market economies.

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