Items

Accounting matters

Chinese AS

US GAAP

Inventories

Cost recognition

The last in, first out (LIFO) method isn't allowed

The LIFO method is allowed

Reversal of inventory impairment

For the provision for impairment that has been made, if the factors affecting its impairment have disappeared, the impairment of inventory can be reversed

The reversal isn't allowed

End-of-period measurement

Measured at the lower of cost or net realizable value

General inventories are measured at the lower of cost or market value; special inventories, such as precious metals, are measured at their net realizable value, even if they are greater than their cost

Fixed assets

Initial confirmation

Measured at historical cost, and fixed assets newly discovered, at replacement cost, revaluation is allowed

Measured at historical cost, no revaluation is allowed

Separate depreciation

Separate depreciation must be made according to the different benefit patterns of the components

Individual depreciation is allowed

Adjustment of depreciation methods

As a change in accounting estimate, it cannot be adjusted retrospectively and is only applicable to future years

Adjusted retrospectively as a change in accounting policy

To be disposed of and not fully depreciated

Continue to depreciate

Stop depreciating

Intangible assets

Revaluation of value

Except for goodwill, revaluation is allowed

No revaluation is allowed

Research and development expenses

Divided into research phases and development phases, with all research phase costs charged to current expenses; development phase costs can be capitalized if eligible or charged to current expenses if not

Charge all research and development stage expenses as current expenses

Amortization

Amortization should be based on the expected realization way of the economic benefits associated with intangible assets; if the expected realization way cannot be reliably determined, it should be amortized using the straight-line method. Intangible assets with indefinite useful lives are not amortized, but their useful lives should be reviewed in each accounting period

No amortization is required, but intangible assets need to be tested for impairment

Deferred income taxes

Initial confirmation

Only confirm the parts that are highly likely to occur, not the portions that cannot be expected to occur

Confirm them all, then evaluate and eliminate the unlikely ones

Subsequent recognition of deferred tax assets

Reduce goodwill after business combinations until it reaches zero, and transfer the excess credit balance into the current net profit or loss

Reduce goodwill and other non-current intangible assets to zero after business combinations and transfer the excess credit balance into the current net profit or loss

Treatment of deferred tax liabilities before mergers and acquisitions

Only the purchase prices of those less than one year are adjusted; those greater than one year are recognized in equity

All purchase prices are adjusted

Contingent liabilities

Determination of the best estimate number for the initial measurement

If there is a continuous range of expenses required by estimated liabilities with the same likelihood of various outcomes occurring, it shall be determined based on the middle value, namely the average of the upper and lower limit amounts within that range

Determine based on the lower limit amount

Borrowing fees

Investment income earned on temporary investments

Investment income earned on temporary investments of funds borrowed for the building of assets should reduce borrowing fees eligible for capitalization

Not deductible

Share-based payments

Option compensation payable

Expenses are determined at each balance sheet date during the waiting period based on the grant date’s fair value and the best estimate of quantities

Expenses are determined based on the condition achievement date’s fair value and the best estimate of quantities

Business combinations

Classification

Categorized as same-control and non-same-control

Indiscriminate

Measurement of consolidated purchase price

The cost of consolidation under common control is based on book value, and that without common control is based on fair value

Based on fair value

Measurement of shareholding subsidiaries

The cost method is used for subsidiaries under control and available-for-sale financial assets, while the equity method is used for joint ventures and associates

The equity method is generally used

Financial reports

Disclosure of information

Comparative information for the previous period must be disclosed

It can be presented alone for a given year

Contents of the financial statements

The three main financial statements are the core, with a lack of a specific breakdown of some accounts in the balance sheet and less content in other statements

Except for the three main financial statements, there are many other typical financial statements, such as the statement of shareholders' income, the statement of retained earnings, and the statement of comprehensive income

Notes section

Small information capacity and limited length

The content is rich and detailed, more specific, and in some cases even takes up more space than the accounting statements