An Economic Analysis Of International Convergence Of Chinese Basic Accounting Standard

Firm is a compact portfolio by many interests group. Because of exchange cost inside firm is smaller than exchange cost of market, the compact can be come out. However, if we want to make sure that exchange cost inside firm be smaller than market, there must be a institution system to make sure that the system operation effective. This system is accounting system. Based on this system, we can make the exchange cost inside a firm lower, and supervise the compact operation effective. If the objective of accounting is to make the exchange cost inside a firm lower, accounting must service to all of the interests group of the firm. And that, the user of financial accounting within financial accounting concept framework is all of the interests group. And So, IASB was pointed in"the framework of press and presentation of financial statements"that the objective of financial statements is to provide information about the financial position, performance and changes in cash flow of an entity that is useful to a wide range of users in making economic decisions, and the qualitative characteristics of accounting information are both relevance and reliability. The sophisticated user of accounting information is a wide range of users. This a role of accounting information in handing exchange cost.Along with the development of market economy, many interest groups other than stockholder and creditors can protect themselves by other institution system other than accounting system, they will no longer depend on accounting. At the same time, with the development of capital market and the socialized of stockholder, how to protect the outside investors is the key problem of accounting. And then, the core role of accounting will change to handle the agency problem of outside investors with inside managers. Because of the core role of accounting is to handle the agency cost of a firm, the main user of accounting information is stockholder and creditors. the objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to stockholders and creditors in making economic decisions. And relevance is outstanding then reliability in qualitative characteristics of accounting information.In China, financial accounting concept framework is called basic accounting standard. Because of the market economy and capital market are not as perfect as American, our basic accounting should convergence to that of IASB rather than to that of FASB. The accounting information should commit to handle the exchange cost inside a firm. So, although the main users of accounting information are stockholders and creditors, the objective of financial accounting is providing information about the financial position, performance and changes in cash flow of an entity that is useful to a wide range of users in making economic decisions, the qualitative characteristics of accounting information are both relevance and reliability.