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Accounting for Goodwill in China – A comparison of IFRS and Chinese Gap and its application by Chinese companies

  • Goodwill accounting is one of the most controversial topics in the accounting field. New ideas and treatments are constantly emerging, providing the latest theoretical frontier knowledge for goodwill accounting. Since 2001, under the impetus of the International Accounting Standards Board (IASB), countries around the world have revised their own generally accepted accounting standards, or just adopted International Financial Reporting Standards (IFRS). The international convergence of accounting standards has made great progress. Chinese GAAP was implemented in 2006 and achieved substantial convergence with IFRS, but there is a certain gap. This is because China's goodwill accounting starts late and the market economy is still underdeveloped. At the same time, China's special national conditions have also created differences with IFRS. This paper uses the literature review method, data analysis method and case analysis method to analyze the similarities and differences between Chinese GAAP and IFRS in terms of goodwill requirements. This paper starts with the definition, initial measurement, subsequent measurement, and disclosure of goodwill. The paper introduces the origin of goodwill, the development of Chinese GAAP and IFRS’s goodwill provisions, and the general trend of convergence. Then this paper shows a detailed description of the timeline for the evolution of goodwill accounting requirements, selects PetroChina Co Ltd (under Chinese GAAP) and British Petroleum p.l.c (under IFRS) as two research objects to do the case analysis, and analyzes the similarities and differences of the requirements of goodwill. I find that there are differences in the method of merge, the type of merge, the measurement of negative goodwill, impairment timing, impairment test unit, measurement method, reversal provisions and so on. Finally, this paper proposes future developments for goodwill requirements in Chinese GAAP. The article believes that the difference in goodwill measurement mainly comes from the national economic levels, the company's equity systems, and the accounting standards. The accounting standards include the development of background differences, institutional mechanisms, government intervention, and accounting information. Based on the above analysis, the final part of this paper is to present the inadequacies and suggestions of the goodwill requirements of Chinese GAAP. There are three innovations in the author’s study. First, former research on goodwill rarely compares Chinese GAAP and IFRS. This paper details the similarities and differences, and points out the problems in Chinese GAAP. The existing literature has studied the differences in accounting standards, but has not penetrated the area of differences in the goodwill accounting. Secondly, the paper conducted a case study. Two oil companies with similar positions in the same industry are selected, and the data of comparative analysis were extracted from the Chinese and foreign databases and the annual reports of listed companies. Thirdly, when studying the different requirements of goodwill between Chinese GAAP and IFRS, this paper combines Chinese and foreign pieces of literature and multiple financial reports, and carries out the historical development of goodwill requirements, which is more conducive to understanding the development of goodwill criteria.

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Metadaten
Author:Xin Wei
URN:urn:nbn:de:kobv:b721-opus4-22878
Referee:Agnes Aschfalk-Evertz
Advisor:Xiang Zhang
Document Type:Master's Thesis
Language:English
Year of Completion:2019
Date of first Publication:2020/08/10
Publishing Institution:Hochschulbibliothek HWR Berlin
Granting Institution:Hochschule für Wirtschaft und Recht Berlin
Date of final exam:2019/07/15
Release Date:2020/08/10
Tag:Chinese GAAP; Goodwill; Goodwill accounting; IFRS
Page Number:66
Institutes:Berlin Professional School (BPS) / Chinese-European Economics Business Studies M.A. (CEEBS)
Licence (German):License LogoUrheberrechtsschutz