Establishing a System of Accounting Standards: A Case Study of Macau

This paper studies the current accounting standards requirements in Macau. Macau has its own financial reporting standards for commercial enterprises, although it is not yet fully developed. We identify that currently there is a lack of a set of financial reporting standards to govern private not-for-profit organizations and also Macau has not yet built up a set of government accounting standards. Currently government departments in Macau mostly adopt cash basis budgeting with the exception of six government entities. The authors propose that Macau should establish a system of accounting standards for various entities in order to improve accounting information quality and thus protecting public interest. It is recommended that at the commercial enterprises level, full adoption of IFRS should be implemented, while at the same time maintaining the current “small GAPP” for small-medium sized enterprises. For private not-for-profit organizations, there is an urgent need to establish a set of financial reporting requirements but it should be simple and based on historical cost accounting. In the long run, Macau should also establish a set of government accounting standards which is separated from budgeting. The research result can be extended to other countries/regions which are at the starting phase of standards setting, especially to those which are small size economy, adopt code law and non-English speaking countries or regions.