Dual Bookkeeping and Reporting by PRC GAAP and IFRS/U.S. GAAP

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By Eberhard Hoffmann

Apr. 6 – A foreign company often needs to prepare two sets of financial reports, one for PRC reporting and the other for global reporting. Some companies even need to track the reports down to the transaction level so that they require two sets of general ledgers to be maintained for PRC Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) respectively. The difference between PRC GAAP and IFRS may lie in different CoA and/or different bookkeeping principles.

For CoA discrepancy, a CoA mapping needs to be done before consolidating PRC CoA and global CoA into one, i.e. set the first level account codes and part of the second level account codes (mostly tax accounts) consistent with the standard PRC account system and map the global account codes in the sub-level accounts. Thus, for a transaction to be captured in the global report the user will retrieve data from the sub-level account balance; for the same transaction to be captured in the PRC report, the user just needs to retrieve data from the first level account balance, which is automatically rolled up from its sub-level accounts.

Different bookkeeping principles, such as different revenue recognition principles, can be accommodated by setting up two databases. One database is used as the main database and follows PRC GAAP in bookkeeping. With the standard entry import/export tool of the accounting system, journal entries in the main database can be exported and imported into the other database, where adjusting entries will be booked in order to satisfy IFRS, U.S. GAAP or whatever global accounting principles.

With the Report Writer module in the accounting system, PRC reports and global reports can be defined respectively by retrieving data either from different account levels in one GL or from two GLs.

Eberhard Hoffmann is the general manager of ABiC information systems (Shanghai) Co., Ltd. – an ERP consulting company with a focus on delivering Kingdee K/3 ERP system to foreign enterprises. Kingdee is a leading vendor of management applications in China. ABiC is platinum level authorized partner of Kingdee, with business area covering sales, implementation, customization and maintenance.

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