After the abacus: China's accounting switch holds perils as well as promise
As his eyes dart back and forth from his office computer, Xue Jianmin cheerily admits to spending an hour each day on one of China's numerous discussion websites. But Mr Xue, chief financial officer of Shanghai Tyre and Rubber, is no work-dodger.
He is fishing for information on the site of the Shanghai National Accounting Institute, whose forums allow debate on regulations that are set to change the way his company presents itself to the world and, in turn, the way the world views Chinese companies.
The bulletin board of which Mr Xue is an active member - the "New Standards Discussion BBS" - was set up after new accounting rules were unveiled in February with unusual fanfare by Jin Renqing, finance minister. The rules promise to deliver unprecedented transparency to Chinese accounts, reassuring foreign fund managers and business executives who have invested billions of dollars in the red-hot economy.
That is because the government has given up on years of tinkering and decided to make a radical switch to a system based on International Financial Reporting Standards. Beijing knows foreign investors view Chinese accounts as opaque, if not wilfully misleading. By embracing recognised norms, it has signalled its determination to address that credibility gap. The 1,200-odd mainland-listed companies must adopt the standards by January.
From an office block squeezed into a sun-starved Shanghai courtyard, the jovial Mr Xue will play a part in determining whether his tyre-making group and the country as a whole will win the trust of investors. "It's a bit of a rush," he says. "We invited our auditors in to give us some training on the new standards, but they haven't finished their own training yet. So we can't do it until the third quarter."
Time constraints are merely one of several potential barriers to success. For the finance ministry, however, the stakes could not be higher, since policy???-makers think poor accounting can hinder economic progress.
"The Chinese government has paid much attention to accounting work in the development of the socialist market economy," says Liu Yuting, director general of the ministry's accounting regulatory department. "It can help us understand the quality of assets and liabilities and the real value of an enterprise. In this way, investors can decide which way to invest, creditors can decide whether to give loans and regulators find it easier to conduct their work."
Accounting reform also intersects with efforts to bolster another element of the country's financial architecture - its dysfunctional stock markets in Shanghai and Shenzhen. The government is seeking to clean up the markets and has gradually eased restrictions on foreigners owning A shares, the most liquid class. By the end of last year, 34 investment quotas worth in total $5.6bn (￡3bn, �4.4bn) had been awarded to qualified foreign institutional investors, according to KPMG. That sum represents less than 2 per cent of market capitalisation, showing how much potential remains unexploited. Foreign direct investment, meanwhile, jumped 19 per cent to $72.4bn in 2005, according to the commerce ministry.
Yet the statistics reveal nothing about the groundwork and risk-taking required from those who brave Chinese financial data. "The level of disclosure is not good," says Neil Juggins,Shanghai-based head of research at Evolution Securities China, a UK broker. "The information you get is not very helpful when you need to do a proper job as an analyst. Since disclosure is poor, you have to ask the company and base your investment decision on what they say. You areeffectively playing it on trust."
Whether accounts deliver a useful picture of a company's financial position is one issue. The more vexing question is whether they are being manipulated to dress up performance - in order to raise capital or preserve a listing - or to cover up fraud. Fund managers and FDI experts say outsiders need to be wary of hidden liabilities, receivables that never materialise, spurious claims on assets and minimal provisions for litigation and bad loans.
Mr Liu at the finance ministry dismisses suggestions that accounting fraud is systemic. "The falsification of profit does exist. But the proportion is not that large," he says. "It's just a small number of companies, and the problem exists not only in China but abroad. Even in the US there was the Enron scandal."
Certainly China has seen a steady drip of corporate scandals, in which investors have lost fortunes. A prominent example is Euro-Asia Agricultural, an orchid business whose flamboyant founder built a Dutch theme village in the Chinese countryside. The company turned out to have inflated its revenues by 20 times ahead of a listing in Hong Kong. It was wound up in 2004 and Yang Bin, the founder, is in jail.
Xu Yanping, managing director of Ginger Capital, a hedge fund, says she has seen big improvements in Chinese accounts over the past decade, but she still treads warily. "In a fast-growing economy companies can cover up a lot of mistakes," she says. Ginger Capital invests less than 10 per cent of its $190m in the A-share market and allocates 80 per cent to Hong Kong, which uses IFRS and is the preferred venue for the mainland's biggest and brightest listings.
One more intrepid A-share investor is Chris Ruffle, a Shanghai-based director at Martin Currie, a UK fund manager that has invested a total of $900m on the mainland. "You need to treat each investment like a private-equity investment and do a bit more work than you would elsewhere," he says. "You visit the office, you meet the people. It's more difficult for them to lie than the numbers."
Sophisticated accounting standards can never be a substitute for such grassroots research. But by improving transparency they can make it more difficult to pass off falsified numbers.
The ultimate impact of IFRS, however, will depend not on the content of the standards but on the people who use them. It is here that China is struggling to overcome the legacy of its past.
China long followed a Soviet accounting system that was designed for state-owned enterprises reporting to central planners and attached priority to costs and productivity rather than returns on investment. Only in 1993 did it move towards a westernised system. Recognising securities at market value - a feature of IFRS - is still almost unheard of (see box). The same goes for the expectation that accountants, faced with broadly framed standards, must exercise judgment in applying them.
The upshot is that the switch does not just impose new technical requirements on the country's accountants. It demands a wholesale change in the way they think and work.
To most European listed companies, IFRS did not represent so revolutionary a shift. Yet, even after four years of preparation, confusion and errors were still common when the standards came into force last year. China has drafted in overseas bodies such as the Association of Chartered Certified Accountants to help with retraining. But a lack of local accountants with any training at all will hamper them.
The Chinese Institute of Certified Public Accountants, established in 1988, has just 140,000 members, half of whom are practising. Jiang Zemin, the country's former president, has said China needs 300,000 CPAs. If it had the same number per head of population as the UK there would be 5.3m.
At the institutional level, too, China has problems. Audit firms, in the past attached to state agencies or university accounting departments, lacked autonomy. The government is understood long to have backed efforts for them to "delink" but doubts about their independence persist.
Of the 70-odd firms authorised to audit public companies, some appear susceptible to pressure from important clients: the government has begun issuing blanket warnings on the need for greater integrity. Ms Xu at Ginger Capital says: "I don't think I'm comfortable with local firms. It's the professionalism of the people. It seems they like to twist the rules."
The big four international firms - PwC, KPMG, Deloitte and Ernst & Young - employ around 20,000 people on the mainland and in Hong Kong. Yet while they lap up Hong Kong listings, they are often scared off by the problems in the A-share market that others would like them to help fix.
When E&Y absorbed the local firm Da Hua in 2001 it had 45 A-share audit clients, according to Tang Yunwei, managing partner of its Shanghai office. Just 25 are left and the tally is likely to drop further. "Listed companies are improving but some still have difficulties with corporate governance and enabling us to do the kind of audits we need to do," he says.
Like most regulations in China, the ultimate impact of IFRS is likely to be determined by the level of enforcement. That task falls mainly to the China Securities Regulatory Commission, the stock market watchdog.
"Things are evolving rapidly on paper, but the key issue is going to be the scope of the CSRC's powers and whether it has independent teeth," says Robert Woll, a partner at the Hong Kong office of Morrison & Foerster, a law firm. "At the moment, despite recent legislation, the CSRC doesn't seem to have as much power as institutional investors would like."
Mr Liu at the finance ministry stresses that the state agencies with a stake in accounting have formed a powerful coalition to police the standards. But Mr Juggins at Evolution adds a caveat. "When the party decides to do something it happens very quickly and all the national bodies fall in behind it. The problem is more implementation at the provincial and local level. People ask: who's pushing this? How much power does he have? What will happen if I don't comply?"
Based on what he has gleaned from the internet, Mr Xue at Shanghai Tyre and Rubber is happy. "Because disclosure will be better, the value of our company on the market will become more accurate," he says. "Our real estate will be reported at market value for the first time, which means our assets will rise. So yes, it's a good thing."
中国将采用“国际算盘”
上
海轮胎橡胶有限公司(Shanghai Tyre and Rubber)财务总监薛建民在办公室电脑上快速扫视，并爽快地承认，他每天都要花一小时浏览中国无数论坛中的一个。但他绝不是在磨洋工。
他是在上海国家会计学院(Shanghai National Accounting Institute)的网站上搜寻信息。该学院的论坛允许参与者就有关法规展开辩论。这些法规将改变他所在企业向世人展示自己的方式，反过来也将改变世界看待中国企业的方式。
薛先生常去的是“新会计审计准则专版”(New Standards Discussion BBS)，该版面在2月份财政部长金人庆高调宣布一系列会计准则后设立。这些准则有望给予中国财务报表前所未有的透明度，使在中国火热的经济中投资了数十亿美元的外国基金经理和企业高管们放心。
解决可信度问题
原因在于，中国政府已放弃了多年的修修补补，决定彻底改用基于国际财务报告准则(International Financial Reporting Standards)的体系。中国政府知道，外国投资者认为中国的财务报表不透明(如果不是故意误导的话)。政府采用公认的准则，表明已下定决心解决可信度鸿沟问题。1200多家中国上市公司必须在1月份之前采用这些标准。
薛先生所在的办公楼位于一个缺少日照的上海院落中。从这里，神情愉快的薛先生将在这场决定他所在的集团乃至国家能否赢得投资者信任的变革中，扮演其中一份子。“事情挺急的，”他说。“我们想请审计师给我们进行一些关于新标准的培训，但他们自己的培训还没完成。所以我们只能等到第三季度了。”
时间紧迫只是改革能否成功的问题之一，尽管财政部热切希望完成这项工程。改革事关重大。政策制订者认为，不完善的会计制度，有可能阻碍经济发展。
“在发展社会主义市场经济的过程中，中国政府对会计工作给予了极大的关注，”财政部会计司司长刘玉廷表示。“会计有助于我们了解一家企业的资产负债质量，以及企业的真正价值。这样投资者就能决定采取何种投资方式，债权人就能决定是否发放贷款，而监管者的工作也会简单得多。”
会计改革还与加强中国金融体系另一重要元素的努力交织在一起，即运转失调的沪深股市。中国政府正试图清理证券市场，并逐步放宽了对外国投资者持有A股的限制。A股是中国股市中流动性最强的股票类别。据毕马威(KPMG)称，截至去年底，中国已向34家合格境外机构投资者(QFII)发放了总计56亿美元的投资额度。这一数字占总市值的比例不足2%，表明尚未开发的潜力十分巨大。相比之下，据中国商务部称，2005年外商直接投资跃升了19%，达到724亿美元。
分析师：数据不可靠
然而，对那些需要研究中国公司财务数据的人来说，这些统计数字丝毫不能反映他们所需的准备工作和冒险。“信息披露程度不够，”英国益华证券中国有限公司(Evolution Securities China)驻上海研究主管尼尔?贾金斯(Neil Juggins)表示。“拿分析师需要做的工作来讲，所得到的信息对工作没有太大的帮助。由于信息披露不足，就得自己去问上市公司，然后根据他们所说的做出投资决策。实际上，投资是建立在信任的基础上。”
财务报表是否真实反映公司财务状况是一大问题。更让人头疼的是，这些财务数据是否被管理层操纵，以此来粉饰业绩（为了融资或者维持上市公司地位），或掩盖欺诈行为。基金经理和外国直接投资专家表示，外来投资者需要警惕隐性负债、无法收回的应收账款、伪造的资产债权，以及随意的诉讼赔偿及坏账准备。
财政部的刘玉廷对会计欺诈是系统性的说法予以否认。“利润造假的确存在，但比例还没有那么大，”他说道。“只是少数公司，而且这个问题不光中国有，国外也有。即使美国也有安然(Enron)丑闻。”
丑闻时有发生
当然，在中国公司丑闻时有发生，导致投资者损失大量财富。一个显著的例子就是主要从事兰花种植的欧亚农业(Euro-Asia Agricultural)。张扬的公司创始人杨斌在中国农村建造了一个荷兰主题村。在香港上市前，该公司虚增营业收入达20倍。公司于2004年退市，杨斌也锒铛入狱。
对冲基金Ginger Capital董事总经理徐艳萍表示，她看到了过去十年中国财务报表的长足改善，但她仍然小心行事。“在一个快速成长的经济体中，企业可以掩盖许多错误，”她说。Ginger Capital的1.9亿美元资金中，不到10%投资于A股市场，80%分配到香港市场。香港采用国际财务报告准则，并且是中国内地一些规模最大、最引人注目的上市行动的首选地点。
“把每笔投资当作私人股本”
一个更为大胆的A股投资者是克里斯?拉弗尔(Chris Ruffle)，他是英国基金管理公司马丁可利(Martin Currie)驻上海投资总监。马丁可利迄今已在中国内地总共投资了9亿美元。“你需要把每笔投资当作私人股本投资来对待，比在其它地方的投资多下点功夫，”他说。“你走访办公室，与人会面。他们比数字更难撒谎。”
复杂的会计准则，永远无法替代此类“草根研究”。但通过提高透明度，它们能让企业更难制造假账。
然而，国际财务报告准则的最终影响，将取决于运用准则的人，而不是准则的内容。正是在这一点上，中国正在竭力克服过去遗留的弊病。
中国长期效仿苏联的会计体系。这个体系是为国企向中央规划部门报告而设计，它将优先事项放在成本和生产率、而不是投资回报上。直到1993年，中国才转向西方会计体系。将证券以市场价值入账――国际财务报告准则的一个特点――几乎仍是闻所未闻。同样闻所未闻的是，面对宽泛的准则，会计师在应用时必须行使判断力。
结果是，会计体系的转换不仅对中国会计师提出了新的技术要求，还要求他们彻底改变思考和工作方式。
江泽民：中国需要30万注册会计师
对大多数欧洲上市公司而言，国际财务报告准则并不意味着如此革命性的转变。但经过四年的准备，当去年开始实施时，混淆和错误仍普遍存在。中国已选择了英国特许公认会计师公会(Association of Chartered Certified Accountants)等海外机构，帮助进行再培训。但缺乏受过任何培训的本土会计师，将妨碍他们的工作。1988年成立的中国注册会计师协会(Chinese Institute of Certified Public Accountants)仅拥有14万名会员，其中半数为执业会员。前任国家主席江泽民曾表示，中国需要30万注册会计师。如果中国的注册会计师占人口的比例与英国相同，那么将有530万人。
中国在制度层面也存在问题。过去，中国的会计师事务所依附于国家机构或大学的会计系，缺乏自主权。1993年，政府给了它们6年时间“脱离关系”，但对它们独立性的质疑仍然存在。
在70多家获得授权可对上市公司进行审计的事务所中，一些事务所似乎容易受到重要客户压力的影响。政府已开始向全体会计师事务所发出警告，要求它们提高诚信度。Ginger Capital的徐女士说：“我认为当地事务所不尽如人意。这是人员的专业质素问题。他们似乎喜欢扭曲规则。”
四大国际会计师事务所普华永道(PwC)、毕马威、德勤(Deloitte)和安永(Ernst & Young))在中国内地和香港雇用了约2万人。然而，尽管它们乐于接手香港上市公司的业务，却常常被A股市场的问题吓跑，而其他人希望它们能帮助解决这些问题。
据安永上海办事处合伙经理汤云为称，安永2001年吞并本地大华事务所(Da Hua)时，大华有45家A股审计客户。现在仅剩25家，而且数量可能进一步减少。他说：“上市公司正不断改进，但一些公司在公司治理以及协助我们完成必要的审计工作方面仍有困难。”
最终取决于执法
正如中国大多数法规一样，国际财务报告准则的最终影响可能取决于执法水平。这个任务主要落到股市监管机构中国证监会(CSRC)身上。
“书面上的改革发展迅速，但关键将在于中国证监会的权限以及它能否独立执法，”美富(Morrison & Foerster)香港律师事务所合伙人罗伯特?沃尔(Robert Woll)说。“目前，尽管最近进行了立法，中国证监会所具有的权力似乎并不像机构投资者希望的那样大。”
财政部的刘玉廷强调，与会计工作有关的国家机构组成了强有力的联盟，以执行这些准则。但益华证券的贾金斯告诫说：“党决定做什么，事情就会很快发生，所有国家机构都会动员起来。问题更多在于省市和地方的执行层面。人们会问：谁在推动这件事？他有多大权力？如果我不服从，会有什么后果？”
基于互联网上收集的信息，上海轮胎橡胶有限公司的薛先生似乎很高兴。“因为信息披露更好，我们公司的市场价值将更加准确，”他说。“我们的不动产将首次以市场价值进行报告，这意味着我们的资产将会升值。不错，这是好事。”
