Editor's notes: Enterprise Accounting Guidelines - Cash Flow Statement (Revised)

Background
The setting of accounting standards in the People's Republic of China (PRC) began with the promulgation of the Enterprise Accounting Standard (the "EAS") in 1993. That document set out general accounting principles (such as consistency and the prudence and accrual concepts) while at the same time prescribing rules on specific accounting treatment for commonly found financial statement items (such as requiring marketable securities to be stated as cost). Following in the footsteps of the EAS are individual accounting standards dealing with specific matters in greater detail. The first of these was issued in May 1997, namely, the standard on Disclosure of Relationships and Transactions between Affiliated Parties for Enterprise Accounting Guidelines (the "Related Party Standard") published by the Ministry of Finance. The second, entitled Cash Flow Statements (the "Cash Flow Standard"), was issued in April 1998 by the Ministry of Finance.¹

The Related Party Standard, which applies only to listed companies for the time being, took effect as of the 1997 financial year. The Cash Flow Standard applies to all enterprises starting from the 1998 financial year.

Both accounting standards have come from a batch of some thirty proposed accounting standards that had been drafted under a project supported by the World Bank that was completed over a year ago. Further accounting standards can be expected to be issued gradually, with the standards mandating disclosures being issued first and those mandating accounting treatment later, i.e. the disclosure standards before the measurement standards.