Ron Stone

If a company is planning to get listed on a US capital market, it must maintain it books and records according to US GAAP.  As part of the reverse merger process, a company will engage an auditor (I will blog on this process later) and have their financial statements attested to by that auditor.   In order to do this the company’s records must be accurate.  China’s taxing system is quite high and companies are incentivized to maintain two sets of books; one for the Chinese government and the other for what actually occurred.  This second set of books usually maintains the cash transactions. 

I recommend engaging a Hong Kong accounting firm to help convert the cash books to the actual records.  Keep in mind, this conversion will likely create a tax burden as the prior year’s unrecorded income is included.  If the tax burden is too great there are other techniques we have used to work around books that cannot be audited.  It is important to be flexible when planning to go public as the structure of the deal may change to meet challenges that present themselves.

Ronald C. Stone (Ron) is the principal of Profit Planners West and Stone Consulting with over twenty five years of business advisory, accounting and tax experience. Additionally, Ron is the Editor in Chief for Micro Cap Review.  Prior to Profit Planners West and Stone Consulting, Ron was the Chief Financial Officer and Operating Officer of Ronco Corp.; a NASDAQ bulletin board traded Public Company. Ron has also been CFO/COO of an entertainment company and CFO of an engineering manufacturer. Ron had his own CPA firm in Beverly Hills and worked there for 15 years. Ron holds a Bachelor’s degree in History from University of California, Los Angeles.