Home' A Plus Magazine : Jan 2013 Contents 14 January 2013
Mainland may adopt IFRS
de facto control standard
China may decide to adopt the international ac-
counting standard covering de facto control. Un-
der revised rules, an investor would be judged
to have de facto control of a company if it can ex-
ert influence on its activities or coordinate with
other shareholders to control the firm with less
than 50 percent of the voting rights. The Ministry
of Finance is seeking public feedback on a pro-
posed draft of the revisions. The new rule is in
accordance with IFRS 10, issued by the Interna-
tional Accounting Standards Board in May 2011,
which takes effect this month.
E&Y to pay out claims
over Sino-Forest audits
Ernst & Young agreed to pay HK$912 million
to settle shareholder claims over its audits of
Sino-Forest, the China-focused forestry com-
pany that collapsed in 2011. The class-action
settlement is one of the biggest in the world,
said Siskinds and Koskie Minsky, the Canadian
law firms representing shareholders. Earlier
last month, the Ontario Securities Commission
said E&Y was facing allegations that it conduct-
ed improper audits of Sino-Forest.
BOC Taipei branch named
clearing bank for yuan
Bank of China’s Taipei branch has been ap-
pointed the clearing bank for yuan transactions
in Taiwan, paving the way for the use of China’s
currency there. “This is a breakthrough for the
establishment of a cross-strait currency clearing
mechanism and important progress for Bank of
China to accelerate its business in cross-border
yuan clearing and settlement,” the bank said in
a statement posted on its website.
All Taiwan companies
to adopt IFRS this year
All publicly traded domestic companies in Tai-
wan will be required to adopt International Fi-
nancial Reporting Standards this year. Foreign
companies listed in Taiwan will be required
to adopt IFRS, American GAAP or Taiwanese
accounting standards at their discretion, the
Financial Supervisory Commission stated, ac-
cording to the China Post.
Gambling taxes will account for about 78 percent of total Macau government
revenue this year, a reduction from 84.3 percent last year. Macau expects casinos
and other gambling taxes to total about 100 billion patacas (HK$97.6 billion),
according to the budget for 2013, an increase from the previous year.
“In 2012, gaming revenue reached 92 billion patacas,” Macau Legislative
Assembly’s second standing committee chairman Chan Chak Mo told Macau
Legislators have criticized the government ’s heav y dependence on revenue
from gambling. But Francis Tam, Macau’s secretar y for the economy and finance,
said the reliance “would remain for some years to come.”
The government plans to spend 82.5 billion patacas this year, 6.7 percent more
than last year. Chan said some of the biggest spending increases would be on trans-
port, education, consumer protection and prisons, as well as the civil ser vice.
Macau sees slight reduction in
dependence on gambling taxes
U.S. regulator cracks down
on firms over China audits
Five affiliates charged with securities violations
The Securities and Exchange Commission in the United States last month
charged the Chinese arms of five large accounting firms with violating securities
laws by refusing to hand over audit papers on China-based companies.
The Chinese affiliates of PricewaterhouseCoopers, Deloitte, KPMG, Ernst
& Young and BDO are under investigation by the SEC for “potential accounting
fraud against U.S. investors.”
The firms are charged with violating the Securities Exchange Act and the Sar-
banes-Oxley Act, which requires non-U.S. accounting firms to provide the SEC
with audit working papers involving companies listed in the U.S. upon request.
“Only with access to work papers of foreign public accounting firms can
the SEC test the quality of the underlying audits and protect investors from the
dangers of accounting fraud,” said Robert Khuzami, director of the commission’s
The audit firms said they are prevented from doing so, citing China’s state
secrecy laws. “Accounting firms in China are not permitted to produce documents,
including audit work papers, directly to any foreign regulator without Chinese gov-
ernment approval, so all firms in China have been unable to produce documents
requested by the SEC,” Deloitte spokeswoman Lauren Mistretta told U.S. media.
The decision to file charges against the five audit firms in China appears to sig-
nal an end to the SEC’s patience, analysts say. “The Chinese, it has concluded, are
simply stonewalling,” said Patrick Chovanec, a professor at Tsinghua University’s
School of Economics and Management in Beijing.
The SEC, which is investigating possible wrongdoing at nine China-based
companies, said a judge would schedule a hearing to determine potential sanc-
tions against the accounting firms.
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