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 Tracking 1053 U.S. listed China Stocks and Counting...
 Tracking 1536 U.S. Stocks and Counting...
Created: 01-Jan-2008

Keying in on fundamental differences between the SEC & SAIC

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Professor 07-Nov-2010 01:36 AM
Post Type: Public Public
A couple of issues you are overlooking.1. As you observe, the SAIC reports only cover Chin... (#4149) In Response to original message: #3588 posted by on 25-Aug-2010 10:37 AM

A couple of issues you are overlooking.

1. As you observe, the SAIC reports only cover Chinese subsidiaries and VIEs.  That means any activity in the offshore companies is not included.  There usually is not much offshore anyway, except in some of the bigger companies.

2. SAIC reports are prepared using Chinese accounting principles, while SEC reports are typically prepared using US GAAP.   Chinese GAAP is evolving, and most companies currently use a fairly primitive form that will migrate to CAS in the next few years.  CAS is comparable to IFRS.    What is important here is that revenue recognition is often considerably different under Chinese standards than US GAAP.  Companies tend to defer recognizing sales for Chinese purposes because the act of formal invoicing triggers the tax liability.  US GAAP has more complex rules for recognizing revenue, and it is not uncommon to see big legitimate differences in revenue between the US accounts and the Chinese accounts.  If this has been properly handled, you can find the differences reconciled in the tax footnotes related to deferred taxes.  This is a complicated area, but a good CPA can figure it out.   Remember, the main reason for the SAIC filings is to support the tax return, and nobody wants to pay more taxes than they have to. 

3. Many Chinese companies listed in the US use a fiscal year end.  They are all required to use a calendar year end for tax purposes.  This causes further differences.

 4.  It appears you are not aware that SAIC filings are not publicly available.  That is not to say they cannot be found - obviously your advisor found them.  However, they likely got them through the back door.  Read up on what happened to the guy from IHS who did this before you make a trip to China. It is very dangerous to be in possession of government documents you do not have the right to see.

 I am not trying to discourage you.  I think Chinese companies need more sunshine. 

 

 

 

 

 

 

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