'Optimism' vs 'Big Bath' Accounting - a Regulatory Dilemma in Chinese Financial Reporting Practices

28 Pages Posted: 7 Aug 2006

See all articles by CHUN JIANG

CHUN JIANG

New England Business School, University of New England

Date Written: July 1, 2006

Abstract

Although China's accounting system has experienced an evolution during the last three decades, its financial reporting practices are still not satisfactory. Optimism, by means of overstating companies' profits and assets value, has always been criticized in China. Therefore, the principle of Conservatism may provide a means of minimizing such improper behavior. With such concern, the paper systematically reviews the financial reporting problems in China. However, through analysis, it is found that although Optimism exists, the extremely contrary case - Big Bath accounting also exists. Hence, this paper argues that Conservatism may not be applicable in contemporary China's financial reporting environment.

Keywords: Financial Reporting, Chinese Accounting System, Optimism, Conservatism, Big Bath Accounting

JEL Classification: M41, M43, M44, M47

Suggested Citation

JIANG, CHUN, 'Optimism' vs 'Big Bath' Accounting - a Regulatory Dilemma in Chinese Financial Reporting Practices (July 1, 2006). Available at SSRN: https://ssrn.com/abstract=922484 or http://dx.doi.org/10.2139/ssrn.922484

CHUN JIANG (Contact Author)

New England Business School, University of New England ( email )

Armidale
Armidale, NSW 2351
Australia
61 2 67732365 (Phone)
61 2 67733148 (Fax)

HOME PAGE: http://www.une.edu.au/ebl/staff/cjiang.php

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