Page 59 - Doing Business in China

ACCOUNTING

Additional regulations have been issued to establish the criteria for qualification as a small enterprise� The criteria
are based on headcounts, revenues and total asset values of businesses in different industries:

Revenue Total Asset Value
Business Headcount
(RMB million) (RMB million)
Agriculture, Forestry, Animal
Husbandry and Fishery Not Applicable <5 Not Applicable
Industrial <300 <20 Not Applicable

Construction Not Applicable <60 <50
Wholesale <20 <50 Not Applicable
Retail <50 <5 Not Applicable
Transportation <300 <30 Not Applicable

Storage <100 <10 Not Applicable
Postal <300 <20 Not Applicable
Hotel and Food <100 <20 Not Applicable
Catering <100 <20 Not Applicable

Information Transmission <100 <10 Not Applicable
Software and Information
Technology <100 <10 Not Applicable

Real Estate Development Not Applicable <10 <50
Property Management <300 <10 Not Applicable
Leasing and Service <100 Not Applicable <80
Others <100 Not Applicable Not Applicable

The following are some major features or requirements when applying accounting standards for small enterprises
compared with accounting standards for larger businesses:
▪ Only the Balance Sheet and Income Statements need to be presented� Cash flow statements and the
statement of changes in equity are optional�
▪ For notes to the accounts, only significant accounting policies, accounting estimates and transactions for the
financial period need to be disclosed�

▪ In accounting for tax, the tax payable method is adopted�
▪ Actual cost is used in accounting for inventory, while the retail and standard cost methods are permitted
under accounting standards for larger businesses�
▪ Borrowing costs for specific purposes can be capitalised upon incurrence of a debt and need not be in line
with the incurrence of capital expenditure�

In the event that the SME is expected to breach the criteria for qualification in the near future, it would be advisable
to adopt the full China GAAP rather than the simplified version for SMEs to avoid the risk of non-compliance�

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