ASIAN ACCOUNTING

Many of the developing Asian country have a colonial history, these countries include Indonesia
(Netherlands), India, Pakistan, Hong Kong, Singapore, Malaysia (United Kingdom), and the
Philippines (Spain/United States). China has been influenced by both Western ideas and the
socialist uniformity of the former Soviet Union. In 1997, many of the developing countries in
Asia experienced declining confidence in their financial markets, which resulted in the Asian
financial crisis.
CHINA
A major shift of emphasis is under way in China from a primary focus on the information needs
of government, that is, need involving national planning and taxation, to a broader view of user
needs that include those of investors, creditors, and enterprise management.
The Peoples Republic of China (PRC) is a communist country. Hence, government, through
laws passed by the National Peoples Congress, is the major influence on accounting and
auditing. Although the history of accounting in China can be traced back 2000 years or so, it was
only in the early 1900s that double entry book-keeping was introduced.
The founding of the PRC in 1949 led to a dramatic change of approach with the introduction of
the Soviet Union style accounting and an emphasis on uniformity and centralized control for
national planning purposes. Since 1978, this approach has been increasingly modified following
Chinas new open door policy to the outside world and its ambitious program for
modernization. Ideas and information from Western countries and indeed all over the world were
sought to help China promote its concept of a socialist market economy based on public
ownership and central planning, but with the market now playing an increasingly important role.
The new accounting standards, structured as a basic standard and a series of specific standards,
represent a major change of approach in Chinese accounting in that all enterprise are now
required to comply with a unified set of accounting principles. However, what is most significant
is the content of the new accounting standards. It represent a new era in Chinese accounting, one
based on a Western market-orientated approach rather than the old Soviet Union style. Fund
accounting based on the equality of fund sources with fund application, has been abolished and
replaced by the accounting equation, where assets equal liabilities plus capital or owners equity.

In making this change, the interest of a wider group of users beyond government have been
recognize, namely, investors, creditors, and enterprise management. Accounting information
must now meet much more than the position and operating result can be understood and financial
practices and administration strengthened, accounting information must also now meet the needs
of external users and management.
INDONESIA
Historically, Indonesias accounting system was based on the Netherlands accounting system as
a result of the Dutch influence on the country. However, when the ties between the two countries
were broken in the mid 1900s, Indonesia turned to U.S accounting practices. The Indonesian
Institute of Accountants (IAI) was created in 1959 to guide accountant throughout Indonesia. In
the 1970s, the IAI created a code to conduct and adopted accounting principles and standards
based on U.S GAAP at the time. As such, Indonesias accounting system focuses on the
information needs of investors over the needs of government. In 1974, IAI created the Financial
Accounting Standards Committee to set accounting standards.
Indonesia has had remarkable economic development over the past decade. However, the Asian
Financial crisis caused the country to return to its previous poverty levels. Since the crisis,
Indonesia has instituted several political and social reforms, which resulted in substantial
changes and returned poverty levels to their pre-crisis levels.
In 1994, the Financial Accounting Standards Committee was reconstituted as the more
independent Financial Accounting Standards Board (DSAK) of the Indonesia Institute of
Accountants. Currently, the DSAK is working to harmonize Indonesia accounting standards with
IFRS.
THAILAND
Thailand is the only country in Southeast Asia that avoided colonial rule. However, its
accounting system value transparency and the information needs of investors, much as in the
Aglo-American countries. After the financial crisis in 1997, Thailand implemented reforms to
increase corporate governance and boost incentives for competition. The Thai economy
recovered quickly and has since sustained growth. Poverty levels have also decreased as a result
of the strengthening economy.

Accounting standards are issued by the Institute of Certified Accountants and Auditors of
Thailand (ICAAT), established in 1948. The Thai Securities Exchange Commission require all
companies listed on the Stock Exchange of Thailand (SET) to be reviewed by independent,
external auditors. Companies listed on the SET must comply with a rigorous set of disclosure
requirements. These requirements illustrate Thailands focus on meeting the information needs of
investors. In addition, it was recently decided that supervision of listed companies will be
transferred from the Ministry of Commerce to the Thai SEC, which will result in one
organization regulating and enforcing the law for listed companies.

EASTERN EUROPEAN ACCOUNTING

Eastern European accounting has historically been based on the socialist concept of a planned
economy. In recent years, countries in Eastern European have been attempting to transition from
centrally planned socialist countries to the Western-style market economy.
POLAND
Poland began its transition to a market economy in 1990 using what is now called the shock
therapy model, meaning that all reforms were made concurrently. Polands goal was to set up the
basis for a market economy in just one year by creating the legal, institutional, and economic
institution necessary to help privatize the economy. Although their transition began under
difficult conditions, such as high inflation, their country emerged as one of the leaders among the
transition countries. Poverty and unemployment are still high in Polland, but the country is
continuing to make progress.
The Soviet Union accounting plan was introduced in 1953 1954, which allocated surpluses to
fund state activities. As such, accounting existed not to measure profit of efficiently but to help
the government allocate excess funds to various state activities. Performance measure were used
only to determine how well enterprises reached state targets for surpluses.
The Accounting Act of 1994 was issued to bring Polish accounting closer to EU standard. Poland
adopted the idea of the true and fair view and issued standards to fill in missing gaps in its
system. The Accounting Act of 2002 was issued to make Polish accounting standard more in line
with IFRS.

Polands entrance into the EU marks a huge step for the country because of the rigorous set of
admission requirements. In order to become a member of the EU, countries must harmonize their
financial requirements with EU rules immediately with no transition periods. Although local
companies face the challenge of adopting many new amendments, the structure is in place to
help Poland succeed in its newly created market economy. As part of the EU, Poland adopted
IFRS in 2005.
RUSSIA
Although the economic situation in Russia has improved, it differs from another transitioning
economies in the following ways. First, the share of new enterprises is low compared to other
economies. Second, many Soviet style production units still exist that are operating at losses
In the Russian Federation, the government has sole control over the accounting system as a result
of its socialist background. Accounting standards in Russia were formulated to keep track of
inputs and outputs. Thus, the standards reflect little about value and profit. Companies in Russia
are more likely to understate revenue to reduce their tax burden then they are to overstate
revenues to appear more profitable.
In 2002, the Russian prime minister announced statements in accordance that Russian companies
and banks would be required to prepare financial statements in accordance with IFRS beginning
in 2004. Specially, all consolidated statements by companies and banks should be prepared with
IFRS. Individuals bank financial statements should also be prepared with IFRS. Individual bank
financial statements should continue to be prepared with Russian GAAP.
CZECH REPUBLIC
The Czech Republic gained its independence in 1993 and subsequently followed the lead of
Poland and implemented the shock therapy model in an effort to convert to a market economy.
Though highly successful for the first few years, the Czech Republic ran into problems with its
currency in 1996, which required it to make tight monetary policy decisions.
The Czech Republic introduced a new tax and accounting system in 1993. Like Poland, this
marked a shift away from a heavy tax orientation. Standards are still created by the Ministry of
Finance, but they now focus more in standards for a market-driven economy.

Like Poland, the Czech Republics admission to the EU marks a huge step for the country
because of the rigorous set of accession requirements. In addition, it illustrates the countrys
success in becoming a market economy, even though economic struggles may still exist. As part
of EU, Czech Republic adopted IFRS in 2005. The current tax system still depend on accounting
rules. As such, changes in current accounting regulation affect income before tax purposes for
tax calculations. Should the government fail to amend the tax act before IFRS becomes the
countrys required standards, it will lose its power to amend rules to adjust the tax base.