Construction Of The Conceptual Framework For China’s Governmental Financial Reporting

Decisions of the Central Committee of the Communist Party on Several MajorIssues Concerned Comprehensively Deepen Reform referred that we should establishgovernmental financial reporting system. Governmental accounting reform hasbecome one of the top issues. This results in the necessity of the construction ofhigh-quality conceptual framework for governmental financial reporting.This paper compares the newly released pronouncements on conceptualframework by International Public Sector Accounting Standards Board (IPSASB) andInternational Accounting Standards Board (IASB) and expounds the relevant views ofFederal Accounting Standards Advisory Board (FASAB) and GovernmentalAccounting Standards Board (GASB) to absorbing advanced ideas. By relating to thesituation of China, this paper develops the concepts applicable to China includingobjectives of financial reporting, reporting entity, qualitative characteristics, elementsof the financial statements, recognition, measurement and presentation. Theobjectives of governmental financial reporting of China should reflect‘accountability’,‘decision usefulness’ and ‘management control’. The elements offinancial statements include deferred inflows, deferred outflows, assets, liabilities,equity, revenue, expenses, surplus, cash inflows, cash outflows and cash balance.Andmeasurement attributes as fair value, replacement cost, net realizable value and valuein use should be applied. The objective of measurement is to choose the measurementattribute which most fairly reflects the service cost, financial capacity and operationalcapacity of the entity in a way that contributes to the evaluation of the accountability,decision-making and self-control. It’s one of the innovations of this paper.The main innovation is that this paper analyzes the similarities and differencesbetween governmental accounting and enterprise accounting by comparing theconceptual framework developed by IPSASB and IASB which aims at identifyingwhat governmental accounting could learn from the enterprise accounting.