The aim of this thesis is to describe and analyse the adoption of International Financial Reporting Standards (IFRS) in the Chinese accounting standards and its possible effects on the accounting quality in financial reports and the economic growth of China. The accounting quality will be examinedthrough five chosen quality aspects: value relevance, faithful representation, comparability, earnings management and transparency. In addition, the view on the level of foreign direct investments will indicate if there has been any effect on economic growth. In order to fulfil thisaim a field study has been conducted, which involves interviews with people within the Chinese accounting industry. The theoretical framework contains an introduction to accounting and its connection to economic growth; background on IFRS and PRC GAAP; an outline of the chosen quality aspects;and finally a commentary on previous research and evidence in IFRS adoption and its effects on accounting quality and foreign direct investments. The empirical findings include the respondents’ view on the adoption of IFRS, accounting quality aspects, FDI and economic growth. The analysis deals with the respondents’ views in the empirical findings, and shows that these views differ on some of the quality aspects such as earnings management and are more consistent when it comes to other aspects such as value relevance. There is belief in the adoption of IFRS and its effects on the accounting quality and economic growth. However, the analysis further demonstrates current obstacles within the new PRC GAAP, such as the use of the fair value, which may problematize the accounting quality. The conclusion demonstrates that the majority of the respondents have experienced an improved overall accounting quality, which they believe has contributed to an enhanced level of foreign direct investment. Moreover, the results reveal a general view among the respondents that the adoption of IFRS also has contributed to the economic growth of China, through the increased level of foreign direct investments.

The scope of the thesis is to present current rules of financial reporting of the Peoples Republic of China so-called China mainland and to provide general insight on the topic. The thesis firstly describes development of Chinese financial reporting, presents objective, role and users of financial reports in China, covers current principles of financial reporting in China, presents the differences between Chinese Accounting Standards and International Standards of Financial Reporting, introduce the reasons behind the differences and presents impact of Chinese culture on financial reporting. The objective of the research is not Special Administrative Region of the People's Republic of China Hong Kong, neither Macao.