# 31. RECONCILIATION BETWEEN U.S. GAAP AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued)

# Notes: (Continued)

# (iv) PRC withholding tax

Under U.S. GAAP ASC 740, which was prior to the adoption of ASU 2016-16, a PRC withholding tax liability of US\$26,090, incurred on intragroup transfer of the 100% equity interest in BeiGene Shanghai to BeiGene Guangzhou in 2017, was carried in the Group’s consolidated balance sheet as a prepaid asset as of December 31, 2017.

Under IFRSs, such PRC withholding tax was charged to the Group’s consolidated statement of operations for the year ended December 31, 2017.

Upon the Company’s adoption of ASU 2016-16 on January 1, 2018, the above PRC withholding tax of US\$26,090 incurred in 2017 was charged to the opening accumulated deficit as of January 1, 2018 in the Company’s U.S. GAAP consolidated financial statements. Hence the above difference in accounting treatment between U.S. GAAP and IFRSs no longer existed for the Company’s accounting periods commencing from January 1, 2018.

# (v) Government subsidies

Under U.S. GAAP, the government subsidies of US\$9,620 received in 2017 relating to the above PRC withholding tax was carried in the Group’s consolidated balance sheet as of December 31, 2017, as other long-term liabilities of US\$9,990 (re-translated at December 31, 2017 closing exchange rate), as a result of the recognition of the related PRC withholding tax as a prepaid asset in the balance sheet.

Under IFRSs, the above government subsidies were recognized as income in the Group’s consolidated statement of operations for the year ended December 31, 2017 as a result of the recognition of such PRC withholding tax as an expense in 2017. In addition, the income tax expense of US\$2,405 on the government subsidies deferred as a prepaid asset of US\$2,498 (re-translated at December 31, 2017 closing exchange rate) under ASC 740 was charged as an expense in the Group’s consolidated statement of operations for the year ended December 31, 2017 under IFRSs as a result of the recognition of such government subsidies as income in 2017. Finally, IFRSs adjustments were made in the Group’s consolidated statement of operations for the year ended December 31, 2017 to account for the consequential impact on the Group’s noncontrolling interests of US\$361 arising from the above adjustments of government subsidies and related income tax expense which are applicable to a non-wholly-owned PRC subsidiary.

As a result of the charge of the relevant PRC withholding tax to the opening accumulated deficit as of January 1, 2018 as mentioned above, the government subsidies of US\$9,990 and the related income tax expense of US\$2,498 carried in the balance sheet as of December 31, 2017 were also recognized in the opening accumulated deficit as of January 1, 2018 in the Company’s U.S. GAAP consolidated financial statements, and the consequential effect on noncontrolling interest of US\$375 (re-translated at December 31, 2017 closing exchange rate) and foreign currency translation difference of US\$263 were included within the Company’s opening U.S. GAAP consolidated balance sheet as of January 1, 2018 accordingly, with resulting adjustment included within the 2018 opening accumulated deficit. The overall net impact on 2018 opening accumulated deficit was US\$6,854. Thereafter the above differences in accounting treatment between U.S. GAAP and IFRSs no longer exist for the Company’s accounting periods commencing from January 1, 2018.