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Document of The World Bank
Report No: ICR00001153
IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-44420 and IDA-31730)
ON A
LOAN IN THE AMOUNT US$27.3 OF MILLION
AND A
CREDIT OF SDR 4.1 MILLION (US$ 5.61 MILLION EQUIVALENT)
TO THE
PEOPLE’S REPUBLIC OF CHINA
FOR AN
ACCOUNTING REFORM AND DEVELOPMENT PROJECT
May 12, 2010
Private and Financial Sector Unit Poverty Reduction and Economic Management Department China Country Management Unit East Asia and Pacific Region
1 CURRENCY EQUIVALENTS (Exchange Rate Effective May 2010) Currency Unit = Yuan Yuan 1.00 = US$ 0.146505 US$ 1.00 = Yuan 6.8257
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AFDC Asia-Pacific Finance Development Center ARDP Accounting Reform and Development Project ASBE Accounting Standards for Business Enterprises BNAI Beijing National Accounting Institute CACPA Chinese Association of Certified Public Auditors CAS Country Assistance Strategy CASC China Accounting Standards Committee CBRC China Banking Regulatory Commission CEO Chief Executive Officer CFO Chief Financial Officer CICPA China Institute of Certified Public Accountants CIRC China Insurance Regulatory Committee CNAO China National Audit Office COSO Committee Sponsoring Organizations of the Treadway Commission CPA Certified Public Accountants CPS Country Partnership Strategy CSRC China Securities Regulatory Committee FDI Foreign Direct Investment FSTA Financial Sector Technical Assistance Project HKSA Hong Kong Society of Accountants IAS International Accounting Standards IASB International Accounting Standards Board IFRS International Financial Reporting Standards M&E Monitoring and Evaluation MOF Ministry of Finance NAI National Accounting Institute PAD Project Appraisal Document PIU Project Implementation Unit PDO Project Development Objective ROSC Report on the Observance of Standards and Codes – Accounting and Auditing SOEs State-owned enterprises SoEs Statement of Expenses
Vice President: James W. Adams Country Director: Klaus Rohland Sector Manager: Tunc Tahsin Uyanik Project Team Leader: Nancy Chen ICR Team Leader: Nancy Chen Acknowledgements: The ICR was reviewed by three peer reviewers, David I, Yi Dong (EAPFM), Robert O’Leary (CTRFC), and was finalized with the assistance of Thang-Long Ton (EASPR).
2 CHINA Accounting Reform and Development Project
CONTENTS
Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph
1. Project Context, Development Objectives and Design 1 2. Key Factors Affecting Implementation and Outcomes 5 3. Assessment of Outcomes 9 4. Assessment of Risk to Development Outcome 12 5. Assessment of Bank and Borrower Performance 13 6. Lessons Learned 14 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 16 Annex 1. Project Costs and Financing17 Annex 2. Outputs by Component 18 Annex 3. Economic and Financial Analysis 27 Annex 4. Bank Lending and Implementation Support/Supervision Processes 28 Annex 5. Beneficiary Survey Results 29 Annex 6. Stakeholder Workshop Report and Results 30 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 31 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders 35 Annex 9. List of Supporting Documents 36 MAP
3 1. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e.g., PAD/ISR, not evaluative)
1.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance)
Background. The objective of the Accounting Reform and Development Project was to assist in the modernization of accounting practices in the People’s Republic of China. World Bank assistance to China in the accounting sector began in August 1992 with a small reform component in the Financial Sector Technical Assistance (FSTA) loan. Then, in 1999 at the request of the Chinese government, the Bank substantially expanded and broadened its support of new accounting standards in China with the current project.
Context. As detailed both in the Country Assistance Strategy (CAS) of the World Bank Group for the People’s Republic of China of 1997 1 the aim of the Bank’s China program was to support macroeconomic stability with growth.2 Key vehicles for achieving indentified objectives were (i) support to reforms in the financial sector; and (ii) acceleration of reforms in state-owned enterprises (SOEs), which long constituted a major drain on the banking system. The Accounting Reform and Development Project—through its focus on the strengthening of accounting standards used by enterprises, and the training of accountants and other financial managers— directly supported both the financial sector and SOE reform agenda.
The government’s request to the Bank was also driven in part by the recognition that larger scale accounting reform would be required for China to meet its long-term economic development goals and needs to integrate with the global economy. At the time of project preparation, China was moving toward World Trade Organization accession and also benefitting from greatly increased foreign direct investment (FDI). There was widespread recognition among the senior leadership that both of these factors required greater accounting consistency, reliability and transparency. The Chinese leadership also realized that consistent, reliable and good-quality financial information is critical in helping the decision-makers in channeling financial resources toward efficient and productive investments and in the ability to attract foreign direct investment.
Bank assistance under the project provided the government with both resources and access to technical and international expertise for use in its efforts to transform the accountancy profession in China. The Bank funded the specific operation as a way to continue and extend the reforms that were initiated under the FSTA project. The only other Bank-supported financial sector project at the time was the FSTA Supplemental Loan, which supported exclusively the payment system components.3
1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)
The overall PDO was to assist in the modernization of China's accounting professionals and accounting systems.
1 Country Assistance Strategy of the World Bank Group for the People’s Republic of China of 1997, Report No. 16321- CHA, February 25, 1997. 2 Project Appraisal Document, Accounting Reform and Development Project, People’s Republic of China, Report No: 18312-CHA, February 1, 1999, p. 2. 3 Memorandum and Recommendation of the President of the International Bank of Reconstruction and Development to the Executive Directors on a Proposed Supplemental Loan in the Amount of US$8.0 million to China for the Financial Sector Technical Assistance Project, Report No: P-7385-CHA, July 6, 2006, p. 1.
1 Components. The project had two main components. The first component was to support the continuing professional education of China’s Certified Public Accountants (CPAs), and other finance managers and professionals to familiarize them, on a large scale, with new accounting, auditing and business administration principles and practices that were generally accepted in market economies. The second component would provide continuing support to the government’s ongoing efforts to develop and to promulgate national accounting standards patterned upon internationally accepted accounting standards. The two components are described in details below.
Key performance indicators. As outlined in the PAD 4, the key performance indicators for:
the Strengthening of Certified Public Accountants and Other Finance Professionals component were: (i) the establishment of the proposed National Accounting Institute (NAI); (ii) the development of training curricula for teaching courses at the Institute; (iii) the number of accounting and finance professionals attending courses at the National Accounting Institute in the initial years of its operation.
the Development and Dissemination of Accounting Standards component were: (i) the preparation, finalization, and publication of new accounting standards; (ii) the holding of dissemination seminars to foster the application of the new standards; (iii) the creation of a website to disseminate and publicize the standards and monitor their application, and (iv) study tours and training of members of the new Accounting Standards Committee.
Key monitoring indicators. In addition, the PAD identified the following key monitoring indicators:
Output indicators:
(i) for the Strengthening of Certified Public Accountants and Other Finance Professionals component: Establishment of NAI and its adoption of a Strategic Plan (by June 30. 1999); Development of an overall curriculum design (by June 30, 2000); Completion of purchase of courses and completion of course adaptations (by June 30, 2001); Completion of course building (by December 30. 2002); Training achieved by the NAI (student days per year or occupancy rates) (end-2000: 35,000 or 10 percent; end-2001: 70,000 or 20 percent; end-2002: 160,000 or 45 percent; and end-2003: 210,000 or 60 percent.
(ii) for the Development and Dissemination of Accounting Standards component: Numbers of old (25) and new (17) standards issued, and dates by which issued (7 per year between 1999 and 2002 and the remaining standards under the program issued by end -2003). Number of high-level seminars held for dissemination of completed standards (3 by end- 2000, 3 more by end-2002 and the last 2 or any remaining by end-2003).
Outcome indicators are:
4 Project Appraisal Document, People’s Republic of China, Accounting Reform and Development Project, p. 2.
2 (i) for the Strengthening of Certified Public Accountants and Other Finance Professionals component: More finance professionals in China trained in modern accounting and financial practices.
(ii) for the Development and Dissemination of Accounting Standards component: Strengthened accounting standards in line with international standards; Improved knowledge of new standards among finance professionals in China, and accelerated use of new standards; More easily available information on accounting standards and their application; and Greater capacity to prepare accounts in accordance with the new standards in harmony with international practice.
Impact indicators are:
(i) for the Strengthening of Certified Public Accountants and Other Finance Professionals component: Greater numbers of competent and capable CPA practitioners and firms; and Development of improved audit capacity in China.
(ii) for the Development and Dissemination of Accounting Standards component: Knowledge of new standards by senior professionals throughout the country; Modernized accounting standards more closely aligned to international standards; Strengthened and more consistent, reliable and transparent financial statements, in both financial institutions and enterprises; and Strengthened financial performance of enterprises and banks and reduced risk for investors.
1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification
The PDO was not revised during implementation.
1.4 Main Beneficiaries, (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project)
The PAD identified the narrow target groups that would benefit from the project (described below). It did not identify explicitly the benefits for the poor, although it can be inferred that the accountancy reforms were intended to support increased FDI and broader economic growth, which would have potentially important benefits to the poor. This aspect of the potential impact of the project could have been identified more clearly at the outset.
As described in the PAD, the expected benefits of the Strengthening of Certified Public Accountants and Other Finance Professionals component were to: (i) help China’s accountants and other finance professionals with the many facets of new accounting, auditing and business administration principles, appropriate to a market economy; (ii) acquaint them with the new accounting norms and standards developed; (iii) provide them ongoing training to keep abreast of new developments in their field, following the practice of continuing professional education for
3 accountants adopted in other market economies. China’s large reservoir of accountants, reasonably well trained, but in the traditions of a planned economy, formed the target population for this component.
By making the accounts more transparent, reliable, consistent and comparable, the development and dissemination of Accounting Standards component was expected to benefit (i) the enterprises themselves, (ii) their bankers, (iii) the government and regulatory agencies, (iv) individual and institutional investors, and (v) prospective foreign investors. These would contributed to better resources allocation resulting in wealth and job creation for the economy, as capital flows to their most efficient usages, guided by the timely, consistent and reliable information sources on accounting.
1.5 Original Components (as approved)
As described above, the project had two main components.
Strengthening of Certified Public Accountants and Other Finance Professionals
The first component was to support the continuing professional education of China’s CPAs, and other finance managers and professionals to familiarize them, on a large scale, with new accounting, auditing and business administration principles and practices that are generally accepted in market economies.
The approach to be adopted was to establish a large residential continuing education facility in Beijing, the NAI, which would offer a wide selection of short courses on specific accounting and business topics for continued professional education. Such courses would include, for example, accounting practices, auditing techniques, taxation, professional ethics, computerized management systems, and various functional management topics. The facility planned was to accommodate 1,500 persons at a time. Based on courses of around a week on average, the total output of the institution would be around 350,000 student-days per year.
This component was initially implemented by the Chinese Institute of Certified Public Accountants (CICPA), a nationwide society, responsible for the professional certification of CPAs, organizing examinations for this purpose and undertaking their professional registration. The project supported this professional body, the establishment of NAI for finance professionals, and the creation of a new cadre of accounting and finance professionals.
Development and Dissemination of Accounting Standards
The second component was to support the government’s ongoing efforts to develop and promulgate accounting standards patterned on and consistent with internationally accepted accounting standards.
The principal vehicle through which this was to be effected was the China Accounting Standards Committee (CASC), which was charged with tasks including: (i) the research, drafting review and evaluation of accounting standards; (ii) coordination of accounting activities with international accounting bodies; and (iii) formal responsibility for the component under the World Bank project. The Committee was formally set up in September 1998, in advance of the project.5
5 Project Appraisal Document, op.cit., p. 4.
4 Assistance to the CASC under the project was expected to comprise: (i) finalization, issue and dissemination of standards developed under the previous FSTA project; (ii) development and publication of new accounting standards, additional to those already undertaken (including selected sector and business standards), and their dissemination to high level officials, such as officials from provincial finance bureaus responsible for application and use of standards; (iii) monitoring the application of standards and development of an advisory/best practice service for users (including a website); and (iv) development of a study tour and training program, and supporting equipment and training materials.
1.6 Revised Components
The project components were not revised during the project implementation.
1.7 Other significant changes (In design, scope and scale, implementation arrangements and schedule, and funding allocations)
The overall design of the project did not change. However, the activities were expanded and deepened: some were made at the request of the government from some funds reallocated as a result of the project’s savings; others were logical follow-ups from the activities funded or reallocated by the project as it was being implemented.
With these additional activities, the project was extended three times to allow for their completion in both project components. In addition, some funds from the IDA credit and IBRD loan were reallocated among components during the life of the project.
Following is a summary of the project extensions to accommodate additional activities: 6
Closing Date Extension—to December 31, 2005. The Bank agreed to a new closing date of December 31, 2005 to accommodate the MOF’s request to add two additional locations, Shanghai and Xiamen, to the NAI component. These two new NAIs -- not originally planned -- provided wider training coverage and greater location coverage for the country, and minimized or reduced the total cost to training program participants, especially those in the provinces far from Beijing. The cost savings amounting to USD 12 million was used to finance equipment procurement and course development at these two additional locations.
Second Closing Date Extension—to December 31, 2007. The MOF requested another extension of the project closing date to December 31, 2007 to ensure that it had time to develop high quality courses for professional CPAs and financial managers as agreed under the project, and that sufficient time was needed for the new accounting institutes in Shanghai and Xiamen to establish and develop their operations. In an effort to facilitate better communication and avoid duplication of course development by the three accounting institutes, a coordination committee was established whereby the three accounting institutes exchanged information and lessons learned from course development.
6 Request for Extension of Closing Date Memo to James Adams, Regional Vice President, EAP, from Nancy Chen, Task Team Leader, EASFP, dated September 5, 2007.
5 Reallocation of IDA funds (2006). In August, 2006, the MOF requested the use of IDA credit’s cost savings under Category 2 b, Consultant’s services, in the amount of US$ 1.6 million, to finance new activities under the credit component. The new activities included: (i) implementation of training on the newly issued accounting standards; (ii) establishment of an internal control framework; and (iii) development of a partnership culture for accounting firms. These new activities were clearly part of a series of broader elements of accounting reform which the Bank aimed to support and Bank management approved this request.
Third Closing Date Extension—to December 31, 2009. The MOF requested a closing date extension to December 31, 2009 for additional time for all training and development of high quality courses for CPAs and financial managers. The Project’s experience has demonstrated through its current implementation that well-developed courses were crucial to the development of a cadre of highly-trained accounting professionals. Specifically, the courses allowed for continued professional education in new accounting and managerial practices.
The extensions were well justified since these have granted the government sufficient time to fully implement important activities that have contributed to the strengthening of China’s accounting development framework, while ensuring the sustainability of the project’s development outcomes.
2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design and Quality at Entry (Including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable)
The overall project preparation, design and quality at entry are considered satisfactory. The project objectives were well articulated and the project design was straightforward with two clear, strategically relevant, and well-funded components. The project design was intentionally simple and focused on two key aspects of the financial sector reform that needed both expansion and attention for the government to achieve substantial reforms. The project was considered as an effective vehicle for the Bank to actively support financial infrastructure in China while maintaining a meaningful financial sector dialog with the government. 7
In general, lessons from previous and similar accounting and financial sector reform projects were incorporated. In particular, the project took into account the need not only to draft new standards, but also to support their dissemination and implementation since these steps are critical in supporting the establishment of a transparent and effective accounting system in China. This was a clear lesson derived from the activities under the previous FSTA project which focused more on the drafting of new standards and not enough on their promulgation and implementation. The project design also incorporated the need for the introduction of international experience in
7 A notable aspect of project preparation is that the government’s original request for support from the Bank was only for financing of the physical infrastructure of the National Accounting Institute. In the end, the Bank financed no physical infrastructure, but rather the pedagogic aspects of accounting training and course development, and development of a new accounting framework convergent with international accounting standards. This shift was the result of the project preparation team’s strong encouragement of the Chinese authorities and the MOF to focus on the “soft” elements of training and the long term benefits and importance of these activities.
6 the development of accounting standards, by including significant resources for specialized international consultant expertise in training and in drafting new standards.8
The government counterparts and agencies—particularly representatives of the MOF and the CICPA—have demonstrated a high degree of commitment throughout the project’s stages. They were actively involved in project design, helping to define the project, scope, activities and timeframe, and further in the implementation stage of the project. The authorities were proactive in expanding the activities under the project, notably the establishment of two additional NAIs. The strong support for the project is further evidenced by the high level of local financing of the project (approximately 50 percent of the original project costs).
In hindsight, one shortcoming in the planning of the project was the proposed timeframe for the implementation of some major activities which were of technical assistance in nature that would require longer gestation and implementation periods to achieve its goals related to institutional development. The NAIs which required facility construction would need -- in hindsight -- some additional time to be established and to begin their operations. With regard to the accounting standards component, it transpires that the time required to develop and disseminate new accounting standards was longer than initially anticipated, especially those that introduced changes and modifications to the existing system.
Risks and mitigation
The project team identified four moderate risks during the design phase. These were specifically:
(i) failure of the CASC to be established as scheduled;
(ii) failure of the CASC to maintain momentum to produce standards per schedule, and to carry out the dissemination of new accounting standards as scheduled;
(iii) failure of NAI/CICPA to be self sustaining financially, due to less than planned student intake; and
(iv) failure of CICPA project consultants to build and adapt curricula as rapidly as considered desirable.
None of these specific factors critically affected project implementation, and the team’s mitigation measures and close supervision were instrumental in overcoming these risks.
8 Project Appraisal Document, op. cit., p. 11.
7 2.2 Implementation (Including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable)
The project did not undergo any restructuring. To the credit of the implementation team and the authorities, the scope and number of activities were expanded significantly, while at the same time remaining squarely within the original project objectives.
As noted before, the government decided to establish not just one but three NAIs as a way to expand the reach of the project. In addition, it decided to issue 38 new standards, more than twice the 17 new standards originally anticipated.9 Further, these 38 new standards were substantially converged with the International Financial Reporting Standards (IFRS) of the London-based International Accounting Standards Board (IASB), rather than national standards with mere similarity with the IFRS, as was initially planned. This convergence has been recognized by Sir David Tweedie, IASB Chairman, “The IASB applauds and expresses admiration for the enormous progress already made toward convergence.” 10 Such convergence increases the impact of the project significantly within the accounting sector of the country, and will likely lead to greater positive long term developmental effect on the Chinese economy.
This expansion of activities carried out under the two components affected implementation which was accommodated by the extensions approved by the Bank – as discussed above -- to achieve broader development outcomes.
2.3 Monitoring and Evaluation
(M&E) Design, Implementation and Utilization
M&E design (the extent to which adequate indicators were identified to monitor progress toward PDO using effective collection methods, given the specific PDO and already available data)
The M&E system design was generally adequate for the purposes of the project. The inputs and outputs were stated clearly and logically and were relatively simple to monitor by the government and the Bank task team. A project implementation unit (PIU) was established within the BNAI for monitoring and recording of the Special Account.
M&E implementation (the extent to which appropriate data was actually collected using appropriate collection methods to ensure data quality)
In reality, the PIU did not have a uniform monitoring system in place for all the partner institutions, and thus had to gather information directly from a variety of sources to obtain results for each component (i.e., the three NAIs for the training component and the CASC for the accounting standards component). This initially was not a major issue, but monitoring grew more complex and time consuming as the project expanded to include Shanghai and Xiamen NAIs.
9 Project Implementation Plan, China Accounting Reform and Development Project, Ministry of Finance, December 1998, p. 1. The plan envisaged that the government would issue 17 “new” accounting standards, as well as issue and implement 17 “old” standards that had been developed, but not completed under the FSTA project. 10 Joint Statement of the Secretary-General of the China Accounting Standards Committee and the Chairman of the International Accounting Standards Board, in ROSC Accounting and Auditing Conference – Agenda Papers, Beijing, China, October 29, 2009, p. 90.
8 Consequently, the PIU was not able to deliver the progress reports as well as the financial management report on a timely basis.
M&E utilization (where possible to assess this, the extent to which appropriate data was evaluated and used to inform decision-making and resource allocation)
The original project objectives were met relatively early on during project implementation, suggesting that they were relatively modest for the resources allocated. They were useful in informing the government on how to utilize project savings to expand project activities within the original components.
2.4 Safeguard and Fiduciary Compliance (Focusing on issues and their resolution, as applicable)
Safeguard and fiduciary management of the project was satisfactory throughout implementation. The project did not have any significant safeguard issues (social or environmental). The project had no environmental impact.
2.5 Post-Completion Operation/Next Phase (Including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable)
The achievements under the project are considered likely to be sustainable. The continued and high level support of the project has been demonstrated by senior MOF officials, one of the major factors contributing to the success of the two components. From the beginning, the MOF set up an effective coordination system among all the entities involved and the Bank’s team anticipates that sufficient government funds and proper management recommendations will continue to be provided to promote their sustainable development. In addition, specific measures to ensure sustainability include:
Under the first component, three NAIs have been established in Beijing, Shanghai and Xiamen. These NAIs currently manage the operation of an excellent teaching and management system based on generally accepted international practices. This system has become one of the key elements for ensuring the sustainability of the institutes. To date, the NAIs have also reached the breakeven between income and expenditures, which is a key achievement that will ensure their successful and sustainable operations. In fact, the Shanghai Accounting Institute in particular has become profitable— offering a number of courses that have proven to be in high demand by students and professionals throughout the country.
For the second component, MOF has established processes to ensure the smooth implementation of accounting standards. This includes the establishment of a coordinated surveillance network with the securities regulator for information sharing and supervision, as well as a feedback mechanism. At the same time, MOF has linked the channels of accounting standards setting, internal control, and information technology to build a multi-tiered regulatory system.
From January 2007 onward, all listing companies must comply with the new accounting standards, and, in 2008, the application of the new accounting standards became
9 mandatory for the enterprises directly under the control of government. In 2009, the government expanded the scope further to cover large and medium enterprises over a period of three years. The enforcement and monitoring of this provision by MOF and regulatory authorities ensure sustainability of the activities supported by this project. The Chinese authorities emphasize the plan to have their accounting standards continually aligned with international standards. In 2008, CASC and IASB signed an agreement on the continuing convergence of standards of the two sides. In April 2010, MOF released a road map on the continuing convergence of the Chinese Accounting Standards for Business Enterprises with the International Financial Reporting Standards with the aim to promote convergence between the two standards.
Follow up activities
The Bank does not envision any follow up technical assistance operations at this time. This is primarily because the project has been considered successful, and that the mechanisms and foundations for sustainability are largely in place (see above). In particular, the MOF has demonstrated strong ownership of the reform program in recent years, and the NAIs have clearly claimed their training mandates in the accounting field and their capacity to carry out their activities has been soundly and sustainably established.
The Bank could potentially contribute to sustaining the benefits achieved under the project by maintaining an active dialog with the government on reforms in the sector. It could also potentially provide advice on certain technical issues through selective technical assistance activities or economic sector work. Further, the Bank could provide technical advice for the MOF in its consideration to prepare a follow-on subproject for technical assistance to comprehensively address the challenges identified by the Bank’s Report on the Observance of Standards and Codes, i.e., further strengthening the accountancy profession throughout the country, including maintaining the high quality accounting standards of corporate accounting, practicing auditors and relevant regulators to ensure compliance with applicable standards more efficiently and effectively, improving and maintaining the quality of accounting and auditing practices outside major cities of the country. 11
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation (To current country and global priorities, and Bank assistance strategy)
The project’s objectives, design and implementation have been highly relevant to the government’s economic reform strategy and consistent with the World Bank Group assistance program. This was outlined in the World Bank Group’s China Country Partnership Strategy (CPS) for the period of 2006-2010 (Report No. 35435) and CPS Progress Report (Report 46896- CN), which 12 identify the Bank’s objective of supporting the strengthening of economic governance in China and the integration of China into the world economy. 13
11 Report on Observance of Standards and Codes (ROSC) – Accounting and Auditing, October 2009. 12 World Bank Group, Country Partnership Strategy for the People’s Republic of China for the Period of 2006-2010, Report No: 35435, May 23, 2006, and Country Partnership Strategy Progress Report for the People’s Republic of China for the Period of 2006-2010, Report 46896-CN, November 7, 2008. 13 Country Partnership Strategy Progress Report for People’s Republic of China for the Period 2006-2010, op. cit, p. 13.
10 The project made important contributions in all the above areas, by making financial information more reliable and transparent in both the public and private sectors, and providing training for a cadre of financial professionals with knowledge of international accounting standards and practices in the country.
3.2 Achievement of Project Development Objectives (Including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2)
The achievement of project development objectives is considered highly satisfactory. The project has been considered widely successful by authorities and the international accounting community in helping to transform and modernize Chinese accounting practices. An examination of the specific outputs also shows that in some areas, the project even exceeded expectations set forth at the start of the project.
Under the first component, the project practically jumpstarted national efforts to create a cadre of finance professionals with a sound knowledge of international accounting practices. It did so by providing the government critical resources to develop and disseminate a curriculum of courses on specific accounting, auditing and business topics and issues, extending beyond original project plans to include two additional NAIs. The ability of China’s many finance professionals to stay abreast of international accounting developments and issues further facilitates the country’s integration into the world economy.
Under the second component, the project supported an important milestone in the development of China’s accounting system—the issuance and implementation of 38 standards that are substantially convergent with IFRS. These have been reinforced by the focus of the project on their implementation and have thus substantially increased transparency of Chinese firms and state owned enterprises. These achievements are expected to facilitate continued private investment in China for years to come.
A summary of the project achievements is provided below. Details on outputs are provided in Annex 2.
Strengthening of Certified Public Accountants and Other Finance Professionals
The government successfully established three NAIs in Beijing, Shanghai and Xiamen. 14 Only the BNAI was originally envisioned under the project. The facilities of two additional institutes were established with savings and reallocation of funds under the project. The establishment of the three facilities allowed the government to dramatically expand the number of students trained at a reduced cost. The Beijing facility served first as a pilot institution, providing rich lessons for the others in course development, institutional management, and administration. The two additional institutions have benefitted greatly from the BNAI.
The NAIs have become not only the premier sources for accounting training in China, but also serve as convenient places for professionals to learn and share the current accounting, auditing, financial management, enterprise management and economic management theories and practices and experiences. They are now considered by many in the sector as world-class accounting institutes with international perspectives and state-of-the-art information technology. The Bank
14 The ROSC on Accounting and Auditing noted that the NAIs have been making “arduous efforts to provide high-quality CPD program in China.” ROSC, op. cit., p. 11.
11 loan was critical in the development of the institutes by focusing and supporting the procurement of high-quality teaching and management equipment and software, the development of high- quality courses; and the improvement of management capability. The training of trainers program has been shown to be highly valuable for the institutes.
The target group for the NAIs has been broadened from CPAs, CFOs and CEOs to include all decision makers in accounting, financial and economic management areas.
Impact. Overall, the impact of these institutes has been to improve the level of continued and continuing professional education of China’s CPAs and senior financial and accounting personnel, enhancing their ability to accept, master and use up-to-date accounting standards, auditing standards, and economic management principles. Further, the work of these professionals in private and public enterprises has helped improve the quality of the accounting information of China’s enterprises and make accounting information more comprehensive, timely, accurate and transparent. These improvements will benefit the full range of market participants, including banks, financial institutions and investors, helping them to make better informed decisions, a sound and basic contribution to the functioning of the private sector.
Development and Dissemination of Accounting Standards
China successfully developed 38 accounting standards which substantially converged with IFRSs in 2006. Building on this achievement, China continues to improve the accounting standards, promotes international convergence of accounting and accelerates the development of accounting regulations, internal control, accounting information standardization and theoretical research. These measures have helped the Chinese accounting community provide better services for economic and social development in its own country, while contributing to the development of the global accounting industry. Further, the Chinese authorities have clearly indicated their intention to continue in aligning the Chinese standards with international ones (please see Section 2.5).
It is notable that the achievement of substantial convergence is an outcome significantly better than originally anticipated. The initial project design expected the issuance of 17 new accounting standards (as described in Section 2.2) with provisions of Chinese accounting and business practices which would have made them, by definition, inconsistent with IFRS. In the end, the project supported the government in its efforts to radically transform the accounting sector through development and dissemination of 38 standards that substantially converged with international standards. The government knows that good financial reporting requires more than good standards. It also requires a strong and effective system of internal controls that ensures that the standards are complied with.
3.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and Financial Rate of Return)
It is important to note that, at the time of project approval, the economic or financial benefits could not be readily or meaningfully identified or quantified. Hence, it was judged inappropriate to attempt any analyses of the present value of benefit and cost flows to predict economic or financial rates of return. Instead, it was decided that a more appropriate financial analysis would comprise direct costing techniques to determine the reasonableness of the daily student fee necessary for the NAI to break even financially at
12 full utilization. This financial analysis would require first a “full utilization” of the three NAIs. However, at the end of the project, the basic concept of “full utilization” was not yet feasible and the available data at the three NAIs did not allow a meaningful financial analysis to be conducted.
3.4 Justification of Overall Outcome Rating (Combining relevance, achievement of PDOs, and efficiency) Rating: Highly Satisfactory
Based on the continued relevance of the project objectives, the satisfactory achievement of objectives, and the level of project efficiency as discussed throughout the report, the overall outcome is rated Highly Satisfactory.
3.5 Overarching Themes. The overall outcome of the project has been highly satisfactory.
Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above)
(a) Poverty Impacts, Gender Aspects, and Social Development
N. A.
(b) Institutional Change/Strengthening (Particularly with reference to impacts on longer-term capacity and institutional development)
As previously mentioned the project contributes to the creation and strengthening of several important institutions that are crucial and relevant to the accounting sector in China. Under the first component, the project was instrumental in the establishment and development of the three NAIs in Beijing, Shanghai and Xiamen. These training institutes which were primary beneficiaries of project funds have grown into top-quality facilities; training tens of thousands of Chinese finance professionals in international accounting practices. The institutes now employ a set of professionals with strong technical knowledge as well as skills in financial management, course development, management and administration.
Through close collaboration during the project implementation period, the CICPA is now a stronger institution, with a broader vision of international accounting. This perspective and experience will contribute to the long term sustainability of project outcomes.
Under the second component, the project strengthened the CASC, which has the primary responsibility in China for developing and disseminating accounting standards. The CASC has become very active in conducting and supporting international exchange and cooperation activities (such as hosting the October 2008 IFRS and China-Japan-South Korea standard-setting conferences in Beijing).
(c) Other Unintended Outcomes and Impacts (positive or negative)
As explained in Section 1.7, part of the project savings was applied to finance a number of new activities which are beneficial to the accounting system.
13 (i) Establish a set of authoritative internal control framework for enterprises and develop a partnership culture for CPA firms. On June 28, 2008, MOF, CSRC, CNAO, CBRC and CIRC jointly issued the internal control framework including 22 internal control standards as well as implementation guidelines,15 which took effect as of July 1, 2009 among the listed companies. The standards have been rolled out to large and medium enterprises at the end of 2009.
(ii) Develop a framework of partnership culture for the CPA firms in China. Under this initiative, CICPA issued a Policy Note on Strengthening the Governance of CPA Firms and CPA Firm Internal Control Guidance, which have taken effect since January 1, 2008.
(iii) On April 26, 2010, the government announced the Implementation Guidelines for Enterprise Internal Control that will take effect among the Chinese listed companies in January 1, 2011.
These standards and guidance notes will play an important role in minimizing the risk of accounting distortion and auditing failure. They will also provide institutional support to improve the quality of financial reporting of both listed and domestic companies, thereby enhancing their international image. In addition, these will serve as basis for reliable financial information which will contribute to efficient resources allocations by decision makers in the business sector. These would insure that capital flow toward the most productive and efficient projects which would in terms create wealth and job for the economy as a whole.
3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (Optional for Core ICR, required for ILI, details in annexes)
Not applicable.
4. Assessment of Risk to Development Outcome
Rating: Low
The risk to the development objective is assessed to be low, as the reforms – by all accounts and measurement standards -- are expected to be sustained in the future. This conclusion is based on four main factors:
(i) The solid and sustainable institutional development of the NAIs. The three NAIs are currently operating effectively, serving well the accounting profession, without subsidy from the government. 16 (ii) A large number of accountants and financial professionals – over 150,000 -- trained by the institutes are currently practicing in the public and private sectors. In their work, they are currently applying their knowledge of up- to- date accounting standards and business practices in firms across China. (iii) New accounting standards have already been put into practice. The new Chinese accounting standards supported under the project have been issued and widely disseminated. Since the new regulatory regime has already been put in place by law—and all listing
15 Sir David Tweedie, IASB Chairman and Larry Rittenberg, COSO Chairman, sent letters of congratulations to the release ceremony, stating the their consistency with the internationally advanced internal control framework in all major aspects. 16 There are no longer any subsidies to the three NAIs for them to operate. However, they do receive impediment counterpart funding similar to government agencies.
14 companies must comply with the standards from July 2007 onwards, the reforms are expected to continue on their own momentum. MOF has chartered the road map for the Chinese standards to be further improved and pursue the convergence with international standards. (iv) The strong ownership demonstrated by the government of its accounting reform program. MOF has consistently demonstrated commitment to the project and broad accounting reform for the past decade. Based on this track record, MOF priorities are not expected to change substantially. Further, the global financial crisis of 2008-2009 also underscored the critical importance of sound international quality accounting practices in China and around the world for the Chinese authorities and the accounting profession in particular.
5. Assessment of Bank and Borrower Performance (Relating to design, implementation and outcome issues)
5.1 Bank Performance
(a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Satisfactory: Quality at entry is considered satisfactory.
The project objectives and related activities were well designed and articulated, focusing on two key elements of financial sector reform. By maintaining a simple and realistic focus, the project achieved substantial and lasting impact in accounting reform -- a strategically relevant area. The project team resisted pressure to burden the project with additional components that could potentially have distracted from the opportunity to achieve large-scale impact in a one crucial area.
While the objectives were adequately and appropriately designed, the project timeline was somewhat unrealistic in hindsight, given the nature of and the need to introduce technical training. In particular, the achievement of objectives of the first component depended on the physical construction of the NAIs. Initial construction delays led to hold-ups in the institutional development and training project components, resulting in early disbursement lags. This design weakness, however, is considered only a minor shortcoming in the overall project preparation and was well remedied by the subsequent establishment of two additional institutes to serve the accounting profession in the country.
(b) Quality of Supervision (Including of fiduciary and safeguards policies) Rating: The quality of supervision is considered satisfactory.
At the government’s request, the task managers of the project were both fluent Mandarin speakers and financial management specialists. Meeting this demand was a key factor in the overall project success, allowing both for constructive and timely ongoing dialog with the authorities, and specialized technical input, minimizing potential misunderstanding from translation.
The Bank also provided consistent and close supervision to the project and there was minimum change in task managers during implementation. This continuity in the project management contributed to the project’s success, particularly given its long timeframe. The Bank’s country
15 management unit and sector management maintained a consistent overall support for the project and generally provided adequate supervision resources to ensure its success.
(c) Justification of Rating for Overall Bank Performance Rating: The overall Bank performance is rated satisfactory.
5.2 Borrower Performance
(a) Government Performance Rating: The government performance is rated as highly satisfactory.
The government is highly committed to the economic and policy reforms and has a strong wish to continue working closely with the Bank in this effort. Counterpart funds were provided by the government to the project. The Technical Division of International Department of MOF acted as the bridge between the Bank and the PIAs, maintained good contact with the PIAs, and provided good support to the Bank supervision/ICR missions by organizing meetings and field visits, as well as participation in the Bank missions. Cooperation between the government and the Bank remained firm at all times of project implementation. Meanwhile, the MOF put in place high level officials that provided exceptional leadership for reforming the sector. At the project level, the International Department of the MOF established a coordination mechanism with the NAIs in an effort to avoid overlap in the course development as well as promoting the sharing of lessons learned. The officials’ deep technical knowledge of the international accounting profession enabled it to shape the long-term government vision and reform goals. In the end, such leadership laid the basis for a fundamental transformation of the accounting profession in China. In certain areas, as described above in Section 3.2, the government exceeded expectations set forth at project design.
(b) Implementing Agency or Agencies Performance Rating: The implementing agencies’ performance is rated satisfactory.
The project had several key implementing agencies, most importantly; the CASC, CICPA, and three NAIs. All of these institutes had positive working relationships with the Bank throughout the implementation period and sufficiently carried out their responsibilities under the project to ensure achievement of the development objectives.
Financial and monitoring reports were provided overall on a timely basis. The NAIs in particular took financial management and procurement responsibilities seriously; devoting significant attention to ensuring that funds were spent efficiently and that consultants delivered high-quality services. This attention to detail and close monitoring of consultant contracts increased the project’s overall impact.
In addition, the strong technical knowledge and strategic vision of implementing agency staff augmented by the training and experience the project provided, helped monitor project activities effectively and achieve greater impact.
(c) Justification of Rating for Overall Borrower Performance Rating: The overall Borrower performance is rated satisfactory.
16 6. Lessons Learned (Both project-specific and of wide general application)
Project-specific lessons It is vital to ensure that the PIU be provided with adequate budget and resources to carry out its responsibilities effectively. The PIU was anchored in the BNAI. At the project outset, this made sense as the PIU was responsible for financial management reporting, procurement and monitoring only for the one training institute and consolidating the information from the accounting reform component. However, as the project progressed and disbursements increased, two new NAIs were established, the procurement and reporting responsibilities increased significantly as a result. At the same time, the government did not increase the budget allocations and resources for the PIU, with the result that staff were at times overstretched throughout key phases of implementation. This had a negative effect on the pace of the project and administrative efficiency. It also limited the contributions the PIU staff could potentially make to the strategic development of the project.
It is essential to have the project structure flexible enough to adapt to changes in the environment. In 2006, MOF issued Accounting Standards for Business Enterprises (ASBE). The new accounting and auditing principles required several courses to be adjusted accordingly. Moreover, professionals had to spend plenty of time and energies on the research and training of ASBE, hence increasing difficulties and postponing curriculum development. Without the third closing date extension, the project would not have had adequate time for all training and development of high quality courses.
The importance of project ownership and technical knowledge of the accounting profession should not be underestimated. At the beginning of the project, the most senior government counterparts had fairly limited knowledge of the international accounting profession. However, when leadership changed, and the government put in place individuals with a more broad vision of accounting, the project impact accelerated dramatically. Under new leadership with greater technical knowledge, the government decided to revise the goals of the project—and in fact aim, not only for issuing accounting standards with Chinese characteristics, but to issues standards substantially convergent with IFRS, the project took a sharply positive turn. The result was to dramatically increase the transparency of the Chinese enterprises—a factor which, in turn, is expected to contribute to the stable development of China’s economy.
Small and local training contracts often produced better results than bulk contracts with larger firms. The BNAI served as a pilot for the project, developing a number of courses for accounting professionals. At the outset, the institute issued a lot of contracts with large accounting or management consulting firms. In the end, several of these contracts turned out to unsuccessful and resulted in contracting disputes. Because the contracts were relatively small for some larger firms, the quality of the staff on the job varied. As the project progressed, the other two NAIs (in Xiamen and Shanghai) began to contract with local academics and professional trainers with positive results. Such contracts tended to produce relatively well designed courses, tailored to local students’ training needs at a reasonable cost and their quality has been internationally recognized (Annex 2).
Project staff needs to be rewarded professionally for responsibilities under the project. Throughout the project the staff of the NAIs were directly involved in course development and procurement of the related consulting services. At times these activities proved complex and time consuming and staff were often not rewarded for additional work. Many of the staff had regular
17 teaching jobs so course development was a significant extra effort. The experience showed that the project needs to build in appropriate resources to keep staff highly motivated.
General lessons
The project benefited from its narrow focus. The project was deliberately narrow in focus— addressing only two, but critically important areas, required for accounting modernization. The result was that key and technically complex issues tended to receive the attention they needed both from government counterparts and Bank staff. The project was able to focus on these areas in part because it was a follow-on project to the broader FSTA project, and the project design team was better able to identify the specific activities and scope of the project.
Even small project components can open doors to major long-term reform operations. The accounting component under the FSTA in 1992 project was a very small part of a larger financial sector reform project. While the reforms under that project had little long term impact (as many of the accounting standards issues were eventually deemed obsolete in the given project), in the end the simple existence of this component helped lead to a much more a substantial accountancy reform project. From the Bank perspective, the relationships established under the FSTA project provided an opening for a larger project. Further, although in 1998, the government requested follow-up support from the Bank only for physical infrastructure of the accounting institutes, in the end, the Bank was able to support long term and deeper accounting reform.
Extend so-called “overage” projects if the project is achieving results. The project was extended three times and was more than ten years old at closing. The Bank at times urges closing of so- called overage projects, as they are often deemed risky. However, in this case, the extensions allowed the government to substantially exceed expectations by adding new training facilities and increasing the number of standards disseminated. It allowed the time necessary to achieve the required institutional development of the accounting institutes and develop high quality courses (see Annex 2). Despite the ten year implementation, the strategic objectives of the project remained relevant to the government development goals and the Bank’s support priorities. This is evidenced in the Bank’s 2003 CAS, which identifies improving the business environment and helping China transition to a market economy as one of the three key elements of the Bank’s assistance strategy in China.17
17 Country Assistance Strategy of the World Bank Group for the People’s Republic of China, Report No. 25141, January 22, 2003, p. iii.
18 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners
(a) Borrower/implementing agencies
The summary and comments from the Ministry of Finance (Annex 7) noted that the project has been considered widely successful and the Chinese accounting practices have been transformed and modernized. In some areas, MOF noted that the project exceeded initial expectations. Specifically, MOF considers the establishment of the three National Accounting Institutes as instrumental improving the level of continued professional education of China’s CPAs and senior financial and accounting personnel and broadening the target groups of professional from CPAs, CFOs, and CEOs to decision makers in accounting, financial and economic management areas. The project is also a critical vehicle in improving the accounting standards, promoting international convergence of Chinese accounting standards, accelerating the development of accounting regulations, internal controls, accounting information standardization and research. MOF also notes that the activities developed by the project will continue on a sustainable path in the future (Annex 2).
(b) Co financiers
Not applicable.
(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)
Private sector partners. The MOF and the CASC actively engaged the private sector throughout project implementation and consulted with it regularly in the development of new accounting standards. Exposure drafts of all new accounting standards were circulated to the private sector for comments and feedback and the government placed a high degree of importance on incorporating feedback. The CASC continues to consult with firms on standards before they are issued.
International partners. The MOF and CASC also made special efforts to establish links and relations with other internationally important partners, such as the International Accounting Standards Board (IASB) in London, which advised on to the development of the standards and also participated actively in China’s international foray into the sector.
19 Annex 1. Project Costs and Financing
(a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) STRENGTHENING OF CERTIFIED PUBLIC ACCOUNTANTS AND OTHER FINANCE PROFESSIONALS A.1. National Accounting Institute $27.4 26.6 97.0% A.2 Institutional support to the $1.4 1.3 92.7% CICPA
DEVELOPMENT AND DISSEMINATION OF $5.2 3.3 63.8% ACCOUNTING STANDARDS
Total Baseline Cost $34.0 31.2 91.8%
Physical Contingencies 0.00 0.00 0.00
Price Contingencies 0.00 0.00 0.00 Total Project Costs 34.2 31.2 91.8% Front-end fee PPF 0.00 .00 Front-end fee IBRD $0.3 0.3 100.0% Total Financing Required $34.2 31.4 91.8%
Note: Figures are rounded.
(b) Financing Appraisal Actual/Latest Type of Co Percentage of Source of Funds Estimate Estimate financing Appraisal (USD millions) (USD millions) International Bank for Reconstruction 27.4 26.6 97.0% and Development International Development Association 6.6 4.7 71.2% (IDA)
______Note: Figures are rounded. Source: Operation Portals, Project P051856, February 26, 2010.
20 Annex 2. Outputs by Component
The outcomes of the two project components are considered satisfactory.
Component 1: Strengthening of Certified Public Accountants and Other Finance Professionals
Output Indicators Achieved/Not Evidence achieved Establishment of NAI and its adoption of a Achieved, the The government established not just one but Strategic Plan (by June 30. 1999) first NAI was three national institutes. established in Beijing National Accounting Institute: 1998 and the established in July 1998; two others in Shanghai National Accounting Institute: 2000 and 2002 established in 2000; respectively Xiamen National Accounting Institute: established in 2002; Development of an overall curriculum design Achieved Internationally accepted curricula developed and (by June 30, 2000) in use in all three NAIs since 2000.
Completion of purchase of courses and Achieved and These activities are on-going in the course of the completion of course adaptations (by June ongoing project to 2009. 30, 2001) Completion of course building (by December Achieved and As of 2008, all three NAIs have achieved course 30. 2002) ongoing buildings for their training programs.
Training achieved by the NAI (student days Achieved As of 2008, over 450,000 student days were per year or occupancy rates) throughout the reported for the three NAIs. (end-2000: 35,000 or 10%; project life as end-2001: 70,000 or 20%; the three NAIs end-2002: 160,000 or 45%; and end-2003: started and 210,000 or 60%. continue their operations Outcome Indicators More finance professionals in China trained Achieved The CICPA has more than 150,000 members in modern accounting and financial practices with 88,000 as practicing auditors and over 70,000 as non-practicing professionals in mid- 2009 (ROSC, October 2009, p. 8-9). Practicing CPAs are required to participate in a continuing professional development program for a total of 80 hours within 2 years, with a minimum of 30 hours each year. Impact Indicators Greater numbers of competent and capable Achieved In 2009, there were over 7,500 accounting firms CPA firms involved in providing statutory audit services in China, employing nearly 300,000 professionals. 60 firms are eligible to undertake audits of listed companies in China. Major firms audit listed companies, small and medium firms perform bookkeeping services, capital verification, and audits for smaller companies. (ROSC, October 2009, p. 9). In 2009, over 20 Chinese firms have joined the international networks, over 40 firms have engaged in overseas business, and 12 accounting firms have set up 22 overseas branches. Development of audit capacity in China Achieved Evident based on over 150,000 accounting professionals working in public and private enterprises, 88,000 of whom are practicing auditors.
21 Over the past decade, the three NAIs supported by the project have established themselves as world-class accounting institutes with state-of-the-art information technology. As part of China’s efforts to carry out the national plan for talent development, the NAIs have trained a cadre of finance savvy professionals in China with an international strategic perspective. The project has supported the procurement of advantaged teaching and management equipment and software, the development of internationally-accepted courses, the improvement of management capability and accounting training for trainers.
As mentioned in the main text above, it is critical to note that only one institute was originally envisioned under the project. After the establishment of the Beijing institute, however, the MOF decided to expand the reach of the project substantially, and establish two more institutes with project funds. The two additional NAIs are located in Xiamen and Shanghai. The three institutes have established a remarkably effective consultation process for course development and regularly share knowledge and experiences with each other.
Following are details of the three training institutes.
Xiamen National Accounting Institute
The Xiamen National Accounting Institute (XNAI) started its official operation in late 2004, and is the newest of the three institutes supported under the project. The institute focuses on the training on accounting and financial management personnel from special economic zones, the western region, private enterprises, medium and small sized enterprises, Hong Kong SAR, China, Macao SAR, China, Taiwan, China and foreign countries.
The institute has a well designed and built campus financed by the government that provides a positive environment for training and knowledge sharing. The institute offers 38 classrooms, 14 conference rooms and halls, one library and 1,100 dormitory rooms on the campus, equipped with high-quality campus management system, teaching assistance system, office support system and trainee management system financed by the Bank loan. The equipment and software were well managed and in good operating condition at the project closing.
From the beginning, the Xiamen Institute has paid close attention to the development of effective and efficient courses based on full market research. The experience of the Beijing Institute in curriculum development proved to be highly useful for Xiamen and many lessons were taken from the Beijing experience. For example, significant efforts were made to offer short-term courses, with most lasting three to five days. To date, about US$1 million of the Bank loan was allocated to support the development of 28 courses, covering accounting, auditing, finance, taxation and economic management. The selection of course developers was in compliance with the Bank’s guidelines.
As of end-2008, XNAI had supported 30 international and regional study tours in an effort to build capacity and develop the skills for a high-quality professional training institute. The study tours and trainings opened new channels for staff to exchange resources and experiences with the other NAIs, as well as internationally well known universities, colleges and training institutes. By the end of 2008, about 800 training courses had been conducted in the XNAI. The total person- days covered had reached 574,516.
22 Shanghai National Accounting Institute
The Shanghai National Accounting Institute (SNAI) began in 2002, two years later than that of BNAI. The Bank loan supported the procurement of a range of good including computers, office equipment, teaching equipment, library automatic management and security monitoring systems, satellite receiving equipment, a digital photograph editing system, a distance-learning system, network equipment, a materials printing system, a conferencing system, TVs, maintenance equipment, office and dormitory furniture, teaching rooms, conference rooms and halls, and a library. The bulk of the equipment remained in good operation as of the closing date.
The SNAI developed a high quality overall curriculum with financing from the project. The curriculum development benefited significantly from the Beijing Accounting Institute experience. To design the curriculum suitable for China’s economic and enterprise situation, SNAI first completed research on China CFO competence framework18 as guidance and formed a distinctive training module featuring degree programs, short-term training programs and distance learning programs. Master of Executive Business Administration (EMBA), Master of Executive Professional Accountancy (EMPAcc) and Master of Professional Accountancy (MPAcc) degree programs have achieved particular success. In addition, the international training programs and workshops held by Asia-Pacific Finance and Development Center (AFDC) have been much acclaimed by the member economies within the Asia-Pacific region.19
The institute offers three categories of courses: (i) short-term training courses, mainly covering senior executive training, CFO training, CPA continuing education and corporate customized training; (ii) middle and long-term degree education courses, mainly covering EMBA Program (Finance Track), EMBA Program ( Service Track), EMPAcc Program and MPAcc Program; and (iii) distance-learning courses, mainly covering CPA Pre-exam Tutoring, Junior and Intermediate Accounting Specialty Technical Qualifications Pre-exam Tutoring, Senior Accountant Qualifications Pre-exam Tutoring and Continuing Education for Accounting Personnel.
Almost all the Bank funds allocated for consulting service were used for developing courses, including 22 distance-learning courses and 17 short-term training courses. The development of above-mentioned distance-learning courses has been completed and the courses have been disseminated on the institute’s website, along with about 80 other courses whose development was financed by the government. All the course developers were well-respected experts in their respective fields.
A total of 23 study tour and training delegations were sent to foreign countries and Hong Kong SAR, China, Macao SAR, China, and Taiwan, China to enhance the link with the international accounting and financial management societies or other universities, colleges and training institutes. The EMBA Program jointly supported by the Shanghai institute and the Arizona University, USA is among the most visible results of such study tours and trainings. The program also has been listed among the top 50 EMBA programs worldwide selected by the Financial Times, UK in 2008. The EMPAcc Program jointly supported by the SNAI and the Chinese University of Hong Kong, aiming to train CFOs qualified for international operation has been highly appraised. In addition, almost all of the institute’s full-time teachers were well trained abroad as visiting scholars and have played a very important role in organizing and implementing the training courses of the Institute.
18 Toward Competent CFO: A Research Report on China CFO Competence Framework. 19 Please see the AFDC web page: http://www.afdc.org.cn/afdc/news_list.asp
23 The Institute aims accommodate 1,200 trainees each day. At end-2008, it reached about 700 trainees each day. In 2007, the number of all the person-days related to short-term training and degree education for 2007 and 2008 was 213,158 and 206,133, respectively. The number of all the person-courses related to distance learning for 2007 and 2008 was 74,317 and 169,147, respectively.
Beijing National Accounting Institute
The Beijing Accounting Institute (BNAI) is the first accounting institute supported by the government under the project. BNAI -- built in 1998 -- was approved by State Council of China and operates under the supervision of the Ministry of Finance. The BNAI is a higher accounting education and training institute dedicated to the training of senior officials and accountants from macroeconomic administration departments of the government, large state-owned enterprises, financial institutes and social agencies across China. It also offers a Master of Professional Accounting (MPAcc) degree. As such, BNAI served as a pioneer in the course development among the three NAIs. The institute has established itself as the training base of continuing professional education for senior accountants with accounting, auditing, finance and economic management as the core subject of training in the Beijing capital area.
The BNAI is headed by a president and is supervised by a board of directors. 20 The Minister of the Finance presides over the Board of Directors. Located at Tianzhu Development Area, Shunyi district, Beijing city, BNAI facility houses 47 modern classrooms, one library, information center, conference center, student entertainment center, gymnasium, 80 student dormitory rooms with dining hall, etc. The facility which opened in June 2001 could accommodate 1,500 persons at one time and will have a throughput of approximately 25,000 persons per year. It offers a wide selection of courses covering a range of topics in areas such as accounting, auditing, taxation, information technology, finance, and business and management principles.
In the beginning, BNAI focused on training activities, averaging over 100 in 2001 on various topics related to accounting and finance with over 10,000 participants in the first year at its campus. The activities subsequently increased in 2002 with about 100,000 participants/days and over 200 training programs per year. The trainees were mainly CFO staff, directors and supervisors of the board, managers and certified public accountants, and executives from administrative agencies and regulatory institutions. The percentage of training programs offered through distance learning was also increasing, thus reaching even more target participants in remote areas. The State Council expanded the initial scope of the BNAI (focusing on continuing professional education) with a full time MBA program (in September 2002) in a joint effort with Tsinghua University.21
Toward the end of the project in 2008, over 150,000 students trained at this Institute and the student training days were over 700,000. At the end of 2009, the BNAI supported 32 international and regional study tours in an effort to build capacity and develop the skills for a high-quality professional training institute. About 1,200 training courses have been conducted up
20 The Board of Directors is composed of senior officials from the Ministry of Finance, the Central Organization Department, the National Development and Reform Commission, the State-owned Assets Supervision and Administration Commission of the State Council, the Ministry of Commerce, the Ministry of Education, the Ministry of Personnel, the People’s Bank of China, the National Audit Office, the State Administration of Taxation, China Securities Regulatory Commission, China Banking Regulatory Commission, Beijing Municipal Government, Shanghai Municipal Government, Fujian Provincial People’s Government, Xiamen Municipal Government, Shanghai Municipal Bureau of Finance, Xiamen Municipal Bureau of Finance, Tsinghua University, Xiamen University, Shanghai University of Finance & Economics. 21 ROSC Accounting and Auditing Conference: Agenda Papers, Beijing, China, October 29, 2009, p. 165-175.
24 to the end of 2009. The total persons-days covered reached 1,024,467 while the on-line training accounted for 10,000 person-courses.
Component 2: Development and Dissemination of Accounting Standards
Output Indicators Achieved/Not Evidence achieved Numbers of old (25) and new (17) standards Achieved: The government decided to pursue full issued, and dates by which issued (7 per year Note: Due to the convergence of accounting standards with IFRS between 1999 and 2002) and 7 or any need for sound and as a result, the “old” standards were remaining standards under the program preparation of determined obsolete. In their place, they issued issued by end 2003. these standards, 38 new standards, that were substantially the original time schedule was convergent, and thus, significantly more modified. All beneficial than originally anticipated. The 38 have been in effect standards and dates are listed in the box below. from 2007 Number of high-level seminars held for Achieved MOF has organized a series of systematic and dissemination of completed standards (3 by multi layer training for over 10,000 trainees who end-2000, 3 more by end-2002 and the last 2 are chairmen, presidents and accounting or any remaining by end-2003). personnel of 1,400 listed companies, certified accounts engaged in securities and futures business and officials from regulatory departments and accounting units, thus laying a solid foundation for the smooth implementation of the new accounting standards. Outcome Indicators
Strengthened accounting standards in line Achieved On November 14, 2005, the International with international standards Accounting Standards Board (IASB) issued a press release and a joint statement with China Accounting Standards Committee (CASC) stating that convergence is a fundamental goals of its Standard-setting program and affirming its intention that a private enterprise applying Chinese Accounting Standards should produce financial statements that are the same as those of an enterprises that applies International Financial Reporting Standards (IFRS). In February 2006, MOF issued new standards which are fully convergent with IFRS (ROSC, 2009, p. 18). In 2008, CASC and IASB signed an agreement on the continuing convergence of standards of the two sides. On September 2, 2009, MOF released a roadmap on the continuing and complete convergence between accounting standards of Chinese enterprises and international financial reporting standards, aiming to promote the convergence between the two standards. Improved knowledge of new standards Achieved Taking into account lessons from previous among finance professionals in China, and operation, the project focused on the accelerated use of new standards implementation of accounting standards among professionals in China. To this end, MOF launched a nationwide training campaign in July 2006 on the new standards with participation of over 10,000 trainees (ROSC, October 2009, p.15). In 2007, the new accounting standards were implemented in 1570 listed enterprises smoothly and effectively; in 2008, the application was expanded to all nonlisted enterprises, nonlisted commercial banks, relevant financial institutions and nonlisted commercial
25 insurance enterprises; In 2009, the coverage was extended to rural credit cooperatives and SOEs in most provinces; In 2010, almost all large and medium enterprises are expected to implement the accounting standards. More easily available information on Achieved In 2003, the website of CASC (in Chinese and accounting standards and their application English) was launched, providing access to the whole accounting society on the accounting standards and raising awareness of accounting standard in the economy. In 2006 a nationwide training campaign was launched by MOF (see above). Greater capacity to prepare accounts in Achieved, with As mentioned above, MOF issued new standards accordance with the new standards in convergence, that were substantially convergent with IFRS; harmony with international practice. not just in Greater capacity to prepare accounts in this harmony respect is evidence by the fact that all firms are using them, effective from 2007. Impact Indicators
Knowledge of new standards by senior Achieved The new standards have been widely professionals throughout the country disseminated with workshops and seminars held for professional throughout China. Modernized accounting standards more Achieved, with MOF exceeded initial expectations Standards closely aligned to international standards convergence were more than “closely aligned to international standards” in the end were fully convergent. Strengthened and more transparent financial Achieved All enterprises in China currently, as of January statements, in both financial institutions and 2007, must comply with the new regulatory enterprises regime including the 38 new accounting standards.
Strengthened financial performance of Achieved Since 2007, the new accounting standards were enterprises and banks and reduced risk implemented, at first with listed enterprises and gradually the coverage has expanded to cover all non-listed enterprises, non-listed commercial banks, relevant financial institutions and non- listed commercial insurance enterprises, rural credit cooperatives and SOEs in most provinces.
The project achieved its objectives under this component and, in doing so, supported the fundamental transformation of China’s accounting model and regulatory regime. Under the direction of the MOF, the CASC led the activities under this project component. Specifically, it coordinated efforts to improve the accounting standards, promote international convergence of accounting and accelerate the development of accounting regulations, internal control, accounting information standardization and theoretical research.
The result has been to the establishment of a new accounting model and regulatory regime in China that is fully convergent with international accounting standards. In the context of growing economic globalization and the opening up of the Chinese economy, the availability of accurate, timely and transparent financial information is increasingly important, making the achievements under this project highly relevant to the long term, stable development of the Chinese economy.
It is critical to note that the government exceeded project expectations under this component by issuing a set of standards that were substantially convergent with IFRS. At project outset, international standards were anticipated only with national characteristics or closely aligned with international standards, which by definition made them less valuable.
Specific key project achievements include:
26 The development, issuance and implementation of 38 new accounting standards. The specific standards are included in the box below.
Translation of the 2008 International Financial Reporting Standards (IFRSs) and other related documents and materials into Chinese. As China officially issued the system of Chinese Accounting Standards for Business Enterprises on February 15, 2006—and effective for all listed companies as of January 1, 2007, this event marks the formal establishment of Chinese accounting standards system for business enterprises adapted to the Chinese market economy and converged with IFRS.
Establishment of a set of consistent and authoritative internal control standards on enterprises including Basic Standards for Enterprise Internal Control, implemented by the listed companies as of July 1, 2009. These standards will play an important role in facilitating the smooth implementation of accounting and auditing standards and checking accounting information distortion and auditing failure. They will also provide institutional support to improve the quality of listed companies and encourage the domestic companies to go global and enhance their international image. The IASB has pointed out that the standard for enterprise internal control remained consistent with the internationally advanced internal control framework in all major aspects.
Since the establishment of the China Internal Control Standards Committee, the project supported theoretical research, on-site review, and standards drafting. Effective results have been achieved in promulgating a series of rules and regulations to standardize its operation and process of standard setting, drafting, comments collection and review. Establishment of a regular dialogue between the MOF and the IASB. In October 2008, the MOF hosted an IFRS Conference in Beijing, attended by the IASB chairman, senior officials from the US Securities and Exchange Committee, and by 350 accounting standards setters in Asian countries. The conference promoted the convergence of accounting standards, fostered knowledge sharing in the development and implementations of standards in Asia.
Completion of a MOF-hosted China-Japan-South Korea standard setting conference in Beijing In October 2008. The conference has promoted the accounting equivalence work with the two countries and established a three country dialogue framework.
On November 14, 2005, the International Accounting Standards Board (IASB) issued a press release and a joint statement with China Accounting Standards Committee (CASC) stating that convergence is a fundamental goals of its Standard-setting program and affirming its intention that a private enterprise applying Chinese Accounting Standards should produce financial statements that are the same as those of an enterprises that applies International Financial Reporting Standards (IFRS). IASB considered this as an enormous progress for China to make toward convergence with IFRSs.
On February 15, 2006, China’s MOF issued a series of new and revised Accounting Standards for business enterprises. These 38 Accounting Standards include the 16 revised and 22 newly promulgated Accounting Standards. They highlighted the establishment of a new system of Chinese accounting standards -- appropriate for the development of the Chinese market economy and convergent with international practices. These Standards were made effective from January 1, 2007 for all enterprises.
27 As the ICR is being prepared, the government announced the release of the Implementation Guidelines for Enterprise International Control on April 26, 2010. These will take effect among Chinese listed companies and other enterprises by stage from 2011.
28 List of 38 Accounting Standards
CAS 1. Inventories Previously issued in and effective since November 2001 CAS 2. Long-term Equity Investment CAS 3. Investment Real Estates CAS 4. Fixed Assets Previously issued in and effective since November 2001 CAS 5: Biological Assets CAS 6: Intangible Assets (1999), Previously issued in and effective since January 2001 CAS 7: Exchange of Non-Monetary Assets CAS 8: Impairment of Assets Previously issued in 2002 CAS 9: Employee Compensation CAS 10: Enterprise Annuity Fund CAS 11: Share-based Payments CAS 12: Debt Restructuring CAS 13: Contingencies Previously issued in April 1999 and effective since July 2000 CAS 14: Revenues CAS 15: Construction Contracts CAS 16: Government Subsidies CAS 17: Borrowing Costs Previously issued in and effective since January 2001 CAS 18: Income Taxes CAS 19: Foreign Currency Conversion CAS 20: Business Combinations Previously issued in 2003 CAS 21: Leases Previously issued in and effective since January 2001 CAS 22: Recognition and Measurement of Financial Instruments CAS 23: Transfer of Financial Assets CAS 24: Hedging CAS 25: Original Insurance Contracts CAS 26: Re-insurance Contracts CAS 27: Exploration of Oil and Natural Gas CAS 28: Changes of Accounting Policies and Accounting Estimates and Error Correction CAS 29: Events after the Balance Sheet Date CAS 30: Presentation of Financial Statements CAS 31: Cash Flow Statements CAS 32: Interim Financial Reporting Previously Issued in and effective since November 2001 CAS 33: Consolidated Financial Statement CAS 34: Earnings per Share CAS 35: Segment Report Previously issued in 2002 CAS 36: Disclosure of Affiliated Parties CAS 37: Financial Instruments: Presentation CAS 38: Initial Adoption of Enterprise Accounting Standards.
29 Basic Standards for Enterprise Internal Control
Implementation Guidelines for Enterprise Internal Control No. 1: Organization Structure
Implementation Guidelines for Enterprise Internal Control No. 2: Development Strategy
Implementation Guidelines for Enterprise Internal Control No. 3: Human Resources
Implementation Guidelines for Enterprise Internal Control No. 4: Social Responsibilities
Implementation Guidelines for Enterprise Internal Control No. 5: Corporate Culture
Implementation Guidelines for Enterprise Internal Control No. 6: Fund-Related Activities
Implementation Guidelines for Enterprise Internal Control No. 7: Procurement Activities
Implementation Guidelines for Enterprise Internal Control No. 8: Asset Management
Implementation Guidelines for Enterprise Internal Control No. 9: Sales Activities
Implementation Guidelines for Enterprise Internal Control No. 10: Research and Development
Implementation Guidelines for Enterprise Internal Control No. 11: Construction Projects
Implementation Guidelines for Enterprise Internal Control No. 12: Guarantee Business
Implementation Guidelines for Enterprise Internal Control No. 13: Outsourcing
Implementation Guidelines for Enterprise Internal Control No.14: Financial Reports
Implementation Guidelines for Enterprise Internal Control No.15: Comprehensive Budgeting
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Implementation Guidelines for Enterprise Internal Control No. 16: Contract Management
Implementation Guidelines for Enterprise Internal Control No. 17: Communication of Internal Information
Implementation Guidelines for Enterprise Internal Control No. 18: Information System
Guidelines for Evaluation of Enterprise Internal Control
Guidelines for Audit of Enterprise Internal Control
Appendix: Specimen Audit Report on Internal Control
30 Annex 3. Economic and Financial Analysis (Including assumptions in the analysis)
Not applicable
31 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/Specialty Lending Anjali Kumar Senior Financial Economist EASFS Task Team Leader Jacque Loubert Sector Manager EASFS Albert Kennefick Regional Accounting/Financial Advisor EAPCO CICPA/NAI Component Maurice Mould Consultant (Arthur Andersen) Accounting Specialist Michele Miller Consultant (Arthur Andersen) Accounting Training Specialist Xiaohong Yang Financial Officer EACCF Beijing Project Coordinator Wu Yingwei Procurement Officer EACCF Procurement Hoi-Chan Nguyen Counsel LEGEA Legal Phillip Daltrop Senior Counsel LEGEA Legal Hyung Min Kim Senior Disbursement Officer LOA Disbursement Weiguo Zhou Consultant/Operations Officer EASRD Costs and procurement Adelma Bowrin Program Assistant EASFS Administration Supervision/ICR Hsiao-Yun Elaine Sun Sector Coordinator EAPFS Acting TaskTeam Leader Haixia Li Sr. Financial Management Specialist EAPCO Financial Management Jinan Shi Senior Procurement Specialist EAPCO Procurement Nancy Chen Senior Financial Management Specialist EASFP Task Team Leader
(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including travel and No. of Staff Weeks consultant costs) Lending FY97 1.19 FY98 18 115.64 FY99 18 112.02 Total: 36 227.66 Supervision/ICR FY99 4 15.85 FY00 11 49.27 FY01 9 39.02 FY02 6 29.48 FY03 7 35.30 FY04 11 66.52 FY05 7 40.91 FY06 12 90.18 FY07 17 87.64 FY08 12 63.81 FY09 13 79.93 FY10 9 49.61 Total: 116 647.50 Note: Figures are rounded.
32 Annex 5. Beneficiary Survey Results (if any)
Not applicable.
33 Annex 6. Stakeholder Workshop Report and Results (if any)
Not applicable.
34 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR
ICR Summary and Comments of
CHINA ACCOUNTING REFORM AND DEVELOPMENT PROJECT
(Credit No. 3173)
Financed by the World Bank
International Department Ministry of Finance People’s Republic of China March, 2010
35 1. Comments on Project Objective
1.1 The objective of the Project is to assist China to strengthen financial management capacity through:
(i) the development of a cadre of well-trained professional certified public accountants and financial managers, and (ii) the establishment of a framework of accounting standards aligned with international standards.
1.2 The Project consists of two components:
Component A: Strengthening of Certified Public Accountants and Other Finance Professionals
(i) Carrying out of a program of continuing education and training for professional certified public accountants and financial managers in the fields of accounting, auditing, financial and business management, through the establishment and operation of a residential national accounting institute and the provision of consultants’ services, equipment and training.
(ii) Strengthening of the institutional capacity of CICPA through the provision of computers, software and other equipment.
Component B: Development and Dissemination of Accounting Standards
Carrying out of a program to develop and disseminate in China accounting standards in line with international accounting standards, through the provision of consultants’ services, equipment and training, such program to include:
(i) preparation, promulgation and dissemination of general and of sector or industry specific accounting standards, including production of training materials and carrying out of training seminars;
(ii) establishment of accounting standards public information sources, including a public information center and an electronic information system, to provide information and advisory services on accounting standards and the related best practice; and
(iii) enhancement of the institutional capacity of CASC to prepare, review and disseminate new accounting standards.
1.3 Revision of the objective: No revision happened to the objective during the project implementation because it is suitable for China’s reform and opening to the outside world, as well as economic development.
2. Achievement of Project Development Objectives
The achievement of project development objectives is satisfactory. The project has been considered widely successful by Chinese authorities and the international accounting community in helping to transform and modernize Chinese accounting practices. An examination of the specific outputs also shows that in some areas, the project even exceeded expectations set forth at the start of the project.
36 Specifically, under the first component, Strengthening of Certified Public Accountants and Other Finance Professions, the project jumpstarted national efforts to create a cadre of finance professionals with knowledge of international accounting practices. It did so by providing the government critical resources to develop and disseminate a curriculum of courses on specific accounting, auditing and business topics and issues, extending beyond original project plans to include two additional NAIs. The ability of China’s many finance professionals to stay abreast of international accounting developments and issues further facilitates the country’s integration into the world economy. Under the second component, Development and Dissemination of Accounting Standards, the project supported an important milestone in the development of China’s accounting system—the issuance and implementation of 38 standards that are substantially convergent with International Financial Reporting Standards (IFRS). The implementation of the new standards has substantially increased transparency of Chinese firms and state owned enterprises and is expected to facilitate continued private investment in China for years to come. A summary is below:
Component A: Strengthening of Certified Public Accountants and Other Finance Professionals
With the support of the project, the government successfully established three National Accounting Institutes (NAIs) in Beijing, Shanghai and Xiamen. Only BNAI was originally envisioned under the project. The expansion to three facilities allowed the government to dramatically expand the number of students trained at a reduced cost, as the Beijing facility served as a pilot, providing rich lessons for the others in course development, institutional management, and administration.
The NAIs have become not only the premier sources for accounting training in China, but also convenient platform to learn the current accounting, auditing, financial management, enterprise management and economic management theories and practices as well as share experiences. They are now considered by many in the sector as world-class accounting institutes with an international perspective and state-of-the-art information technology. The project was critical in the development of the NAIs, by supporting the procurement of high quality teaching and management equipment and software, the development of high-quality courses; and the improvement of management capability. The training of trainers program has also been shown to be highly valuable for the institutes.
The target group for the NAIs has been broadened from CPAs, CFOs and CEOs to include all decision makers in accounting, financial and economic management areas.
Overall, the impact of the NAIs has been to improve the level of continued professional education of China’s CPAs and senior financial and accounting personnel, raising their ability to accept, master and use up-to-date accounting standards, auditing standards, and economic management principles. Further, the work of these professionals in private and public enterprises has helped improve the quality of the accounting information of China’s enterprises and make accounting information more comprehensive, timely, accurate and transparent. These improvements will benefit the full range of market participants, including banks, financial institutions and investors, helping them to make more informed decisions.
37 Component B: Development and Dissemination of Accounting Standards
With the Bank’s support, China successfully developed 38 accounting standards substantially converged with IFRSs in 2006. China continues to improve the accounting standards, promotes international convergence of accounting and accelerates the development of accounting regulations, internal control, accounting information standardization and theoretical research. These measures have helped the Chinese accounting community provide better services for economic and social development in its own country, while contributing to the development of the global accounting industry.
It is notable that the achievement of substantial convergence is an outcome significantly better than anticipated. The initial project design anticipated issuance of 17 new accounting with provisions of Chinese accounting and business practices which would have made them, by definition, inconsistent with the IFRS. In the end, the project supported the government in its efforts to radically transform the accounting sector through development and dissemination of 38 standards that substantially converged with international standards. The achievement of substantial convergence was validated by the Accounting and Auditing ROSC22.
3. Sustainability of the Project
Component A – The three NAIs have been established in Beijing, Shanghai and Xiamen. These NAIs currently operate an excellent teaching and management system based on good international practices. This system has become one of the key elements for ensuring the sustainability of the institutes. To date, the NAIs have also reached the breakeven between income and expenditures, which is a key achievement that will allow them to keep operating. In fact, the Shanghai Accounting Institute in particular has become profitable—operating a number of courses that have proven to be in high demand from students and professional throughout the country.
Component B –The MOF, as a policy-maker and a member of the Financial Stability Board (FSB), developed a Roadmap for continuing and full convergence of the Chinese Accounting Standards for business enterprises with IFRS (Exposure Draft) in September 2009. China plans to achieve full convergence in 2011, and roll out the CAS to all large and medium-sized enterprises in 2012. Furthermore, the Accounting Department of the MOF is considering preparing a follow- on subproject for technical assistance to comprehensively address the weaknesses identified by the ROSC. These undertakings would help ensure the sustainability of the development outcome under the current project.
22 A ROSC Conference was held in Beijing, on October 29, 2009. Mr. Li Yong, the Vice Minister of Finance, MOF, delivered an opening speech at the conference. Ms. Penelope J. Brook, Acting Vice President, Financial and Private Sector Development, also spoke at the ROSC Conference.
38 Annex 8. Comments of Co-Financiers and Other Partners/Stakeholders
Not applicable.
39 Annex 9. List of Supporting Documents
Official World Bank Project Files
Project Appraisal Document, People’s Republic of China, Accounting Reform and Development Project, Report No: 18312-CHA, February 1, 1999.
Project Implementation Plan, China Accounting Reform and Development Project, Ministry of Finance, December 1998.
Request for Extension of Closing Date Memo to James Adams, Regional Vice President, EAP, from Nancy Chen, Task Team Leader, EASFP, dated September 5, 2007.
Project Implementation Status Reports, Aide Memoires, and other email correspondence filed in IRIS, 1999-2009.
Financial Management Supervision Reports, China Accounting Reform and Development Project, including reports of August 26, 2008 and April 23, 2009.
Country Assistance Strategy Documents
Country Assistance Strategy of the World Bank Group for the People’s Republic of China, Report No: 14454 CHA, May 4, 1995.
Country Assistance Strategy of the World Bank Group for the People’s Republic of China of 1997, Report no: 16321-CHA, February 25, 1997. Country Assistance Strategy of the World Bank Group for the People’s Republic of China, Progress Report, May 1998. Country Assistance Strategy of the World Bank Group for the People’s Republic of China, Report No. 25141, January 22, 2003.
Country Partnership Strategy Progress Report for People’s Republic of China for the Period 2006-2010, Report 46896-CN, November 7, 2008.
Other documents
Workshop Report: Development and Implementation of Chinese Accounting Standards, Ministry of Finance, People’s Republic of China, October 2008.
Memorandum and Recommendation of the President of the International Bank of Reconstruction and Development for the Financial Sector Technical Assistance Project, Report No: P-7385- CHA, July 6, 2006.
40 Appendix 1. Occupancy of National Accounting Institutions
BNAI SNAI XNAI Number of Number of Number of Student Year Student Days Student Days Students Students Students Days 1998 540 1,620 1999 887 2,640 2000 2,402 7,200 2001 17,433 67,944 2002 23,135 104,222 2003 15,774 102,465 25,090 103,291 2004 14,252 107,190 33,561 145,298 3,187 22,947 2005 22,635 106,915 34,459 169,433 19,981 121,545 2006 23,991 136,042 37,899 200,907 24,081 154,830 2007 26,107 131,052 36,620 213,644 22,168 128,045 2008 19,398 104,330 39,746 206,133 22,562 147,149 Total 122,157 687,994 251,772 1,222,332 91,979 574,516
Note: Data from BNAI are not comprehensive and the data for the other NAIs do not replace the data given by the NAIs themselves. Source: For BNAI: ROSC Accounting and Auditing Conference: Agenda Papers, Beijing, China, October 29, 2009, p. 170. For XNAI, Report, October 2009, p. 7.
41
MAP
I N S E R T
M A P
H E R E
AFTER APPROVAL BY COUNTRY DIRECTOR
AN ORIGINAL MAP OBTAINED FROM GSD MAP DESIGN UNIT
SHOULD BE INSERTED
MANUALLY IN HARD COPY
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NOTE: To obtain a map, please contact
the GSD Map Design Unit (Ext. 31482)
A minimum of a one week turnaround is required
42