"We follow IFRS" is not the same as "no differences"
PRC GAAP — the Accounting Standards for Business Enterprises (ASBE / CAS) — is substantially converged with IFRS, and AASB standards are IFRS-equivalents issued by the Australian Accounting Standards Board.
So in principle, three frameworks all point in the same direction. In practice, the divergences that survive convergence are precisely the ones that affect group decisions. They are also the ones board packs tend to hide.
The differences that show up at board level
Below are the recurring areas where the PRC-presented numbers and the AASB / IFRS-presented numbers can tell different stories about the same underlying business. The list is not exhaustive — it's the set we see most often in Australian-headed groups.
Business combinations and common-control transactions
ASBE accounts for business combinations under common control using a pooling-of-interests style approach, with assets and liabilities transferred at carrying amounts. AASB 3 / IFRS 3 has no equivalent treatment for common-control combinations and leaves it to group accounting policy choice.
For groups that restructured through a Hong Kong holding entity or did an internal transfer of operating subsidiaries, this divergence can produce materially different reported equity, goodwill, and reserves between the local books and the consolidated view.
If you are unsure how this framework divergence at board level is currently impacting your group close, you can run a 2-minute diagnostic via our Close Clash Calculator to see where the evidence path is breaking down.
Revenue recognition timing and presentation
ASBE revenue (CAS 14, revised 2017) is closely aligned with IFRS 15 / AASB 15, but the application differs in practice. Local invoice and tax-driven recognition timing — particularly around customer acceptance, multi-element arrangements, and bill-and-hold — can produce period differences. Board-level revenue is then a translation of recognition events that may be timed differently than the operating team experiences them.
Leases
CAS 21 (revised 2018) is closely aligned with IFRS 16 / AASB 16, but transition treatment, low-value asset thresholds, and discount rate selection are common divergence points. EBITDA, EBIT, and the balance sheet shape can differ between local presentation and group presentation even after convergence.
Investment property
ASBE permits both cost and fair value models for investment property, but the fair value option requires evidence of an active market and is used selectively. AASB 140 / IAS 40 permits free choice of model after initial recognition. A subsidiary on cost model and a group on fair value model will produce different earnings volatility.
Government grants and incentives
PRC government incentives — tax holidays, R&D super-deductions, regional bureau-level grants — are accounted for under specific local guidance and may be presented as either revenue or a reduction of related costs. AASB 120 / IAS 20 has a different presentation logic. Board packs that read incentive income as "revenue" without translation can overstate operating performance.
Provisions, related parties, and disclosure
PRC statutory disclosure requirements are narrower than AASB / IFRS in several areas, particularly related-party transactions, key management personnel, contingent liabilities, and segment reporting. The translation step has to add disclosure that the PRC entity simply doesn't produce.
Functional currency and FX
Functional currency determination under HKAS / IAS 21 / AASB 121 is a judgement, not a default. In groups where the PRC entity's functional currency was set without documented analysis, every translation produced for the group is built on an assumption that hasn't been tested.
Why board packs tend to hide these
There are three structural reasons:
- Convergence makes everything look familiar. When the bottom line agrees within tolerance, board members and even some finance leaders treat the underlying frameworks as equivalent.
- The translation step is performed once a year. Most of the differences sit in adjustment journals booked at year-end, then disappear into the prior-period comparative the following cycle. The pattern over time is invisible.
- The narrative is written from the group view down. Board commentary explains the consolidated number, not the divergence between the local and group presentations.
The board sees a clean number. The audit committee, if it asks, sees a year-end adjustment. The translation logic, the policy choices, and the divergence patterns sit in a working file that nobody is required to read.
What to surface, and where
The board pack doesn't need the full reconciliation. It needs three things:
- A short note flagging the categories where local and group presentation diverge materially, refreshed annually
- A continuous reconciliation between PRC statutory equity and group equity, included in the audit committee pack
- An explicit policy log: business combinations under common control, functional currency determinations, lease transition choices, government grant presentation, investment property model
Those three artefacts move the divergence from "hidden" to "governed". The numbers don't change; the visibility of the judgements behind them does.