What is EAI?

EAI_1

Investments in the PRC (especially industrial) have normally been conducted via offshore companies (in particular holding corporations in Hong Kong) which directly own FIE (Foreign Investment Enterprises) to invest, operate, produce, export, etc. However, due to the substantial variances in taxation, custom and investment laws and practices between the PRC and Hong Kong, it is unavoidable that business data in term of time, value and quantities cannot be accounted for simultaneously in the books of the corporations on both sides.

In simple term, the financial statements in Hong Kong (“A”) can hardly consolidate the audited financial statements of the FIE in the PRC (“B”), or even the internal management accounts (“C”) of the investment.

If to integrate the aforesaid ABC financial statements to conform with international accounting standards and Hong Kong Companies Ordinance, most investing corporations consider this area as a big task to tackle. Nevertheless, if no integration is done, it is a violation of the laws in Hong Kong which certainly forces the auditors to give a disclaimer qualification or even an adverse opinion on the financial statements.

 

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