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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II REQUIREMENTS FOR THE QUALITY OF ACCOUNTING INFORMATION CHAPTER III ASSETS CHAPTER IV LIABILITIES CHAPTER V RIGHTS AND INTERESTS OF THE OWNERS CHAPTER VI INCOMES CHAPTER VII EXPENSES CHAPTER VIII PROFITS CHAPTER IX ACCOUNTING MEASUREMENT CHAPTER X FINANCIAL ACCOUNTING STATEMENTS CHAPTER XI SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PROVISIONS Article 1. In accordance with the Accounting Law of the People's Republic of China and other relevant laws and administrative regulations, these standards are formulated to regulate the accounting recognition, measurement and reporting acts of enterprises and to ensure the quality of accounting information. Article 2. These Standards shall apply to the enterprises established within the territory of the People's Republic of China (including companies, the same hereafter). Article 3. The accounting standards for enterprises include basic standards and concrete standards. The formulation of concrete standards shall comply with these Standards. Article 4. An enterprise shall formulate financial accounting statements (also referred to as financial statements, the same hereafter). The purpose of financial accounting statements is to provide the users of the financing accounting statements with the accounting information about the enterprises¡¯ financial status, operating performances, cash flow, etc., to reflect how the management level of the enterprises exercises the entrusted responsibilities, and help the users of the financing accounting statements to make economic resolutions. The users of the financing accounting statements include investors, creditors, government and its relevant departments, as well as the general public. Article 5. An enterprise shall make accounting recognition, measurement and report for its own transactions or events that have actually occurred. Article 6. The enterprise accounting recognition, measurement and report shall be based on the precondition of going concern. Article 7. An enterprise shall prepare settlement accounts and financial statements on the basis of different accounting periods. The accounting periods may be classified into annual and interim accounting periods. An interim accounting period refers to a report period which is shorter than a full fiscal year. Article 8. The enterprise accounting shall be denominated in currencies. Article 9. The accounting recognition, measurement and report of an enterprise shall be made on the accrual basis. Article 10. An enterprise shall determine the accounting elements according to the economic characteristics of the transactions or events. The accounting elements include the assets, liabilities, the owner's rights and interests, incomes, expenses and profits. Article 11. An enterprise shall adopt the debit-credit bookkeeping method. CHAPTER II REQUIREMENTS FOR THE QUALITY OF ACCOUNTING Article 12. The accounting recognition, measurement and report of an enterprise shall be based on the transactions or events that have actually occurred, shall faithfully reflect all the accounting elements and other relevant information that satisfy the recognition and measurement requirements, and shall ensure the genuineness and reliability of the accounting information as well as the completeness in contents. Article 13. The accounting information offered by an enterprise shall be related to the economic resolutions of the users of the financial accounting statements and shall be helpful for the users of the financial accounting statements to make comments or forecasts on the past, current or future situation of the enterprise. Article 14. The accounting information offered by an enterprise shall be clear and explicit so as to facilitate the understanding and utilization of the users of financial accounting statements. Article 15. The accounting information offered by an enterprise shall be commensurable. The accounting policies which are adopted for the identical or similar transactions or events that occurred at different stages in a same enterprise shall be coherent with each other. It shall not be changed at will. If it is really necessary to make a change, an explanation shall be given in the annotations. The prescribed accounting policies shall be adopted for the identical or similar transactions or events that occur in different enterprises so as to ensure that accounting information are based on the same standards and are comparable. Article 16. The accounting recognition, measurement and report of an enterprise shall be based on the economic essence of the transactions or events, rather than merely on the legal form of the transactions or events. Article 17. The accounting information offered by an enterprise shall reflect all the important transactions or events relating to its financial status, operating results and cash flow. Article 18. When an enterprise makes accounting recognition, measurement and report for the transactions or events that have actually occurred, it shall be prudent and shall not over-estimate the assets or proceeds, or under-estimate the liabilities or expenses. Article 19. An enterprise shall timely make accounting recognition, measurement and report for the transactions or events that have actually occurred. It shall not do so in advance nor postpone doing so. CHAPTER III ASSETS Article 20. The term "asset" refers to all the resources which are formed by the past transactions or events of an enterprise, are owned or controlled by the enterprise, and are expected to bring economic benefits to this enterprise. The term "past transactions or events of an enterprise" includes the purchase, production and construction acts or other transactions or events. Any transaction or event which is expected to occur in the future does not form any asset. The phrase "owned or controlled by the enterprise" means that the enterprise enjoys the ownership of a certain resource, or it does not enjoy the ownership of this resource but this resource is controlled by the enterprise. The phrase "to bring economic benefits to the enterprise" refers to the potential to directly or indirectly cause any cash or cash equivalents to flow into the enterprise. Article 21. Any resource, which conforms to the definition as given in Article 20 of these Standards, shall be recognized as an asset if it simultaneously satisfies the following conditions: (1) The economic benefits relating to this resource is likely to flow into the enterprise; and (2) The cost or value of this resource can be reliably calculated. Article 22. Any item which conforms with the definition and recognition conditions of asset shall be listed in the balance sheet. Any item which meets the definition of asset but does not satisfy the asset recognition conditions shall not be listed in the balance sheet. CHAPTER IV LIABILITIES Article 23. The term "liability" refers to the current obligations which are formed by the past transactions or events and which are expected to cause the economic benefits to flow out of the enterprise. The term "current obligations" refers to the obligations that enterprise has undertaken under the current conditions. The obligations are formed by future transactions or events do not fall within the scope of current obligations and shall not be recognized as liabilities. Article 24. Any obligation which conforms to the definition of liability as given in Article 23 of these Standards and which simultaneously satisfy the following conditions shall be recognized as a liability: (1) The economic benefits relating to this resource is likely to flow out of the enterprise; and (2) The cost or value of the resource to flow out of the enterprise can be reliably calculated. Article 25. Any item which conforms with the definition and recognition conditions of liability shall be listed in the balance sheet. Any item which meets the definition of liability but does not satisfy the liability recognition conditions shall not be listed in the balance sheet. CHAPTER V RIGHTS AND INTERESTS OF THE OWNERS Article 26. The term "rights and interests of the owners" refers to the surplus rights and interests after deducting the liabilities from the assets of the enterprise. The term "rights and interests of the owners of a company" is also referred to as "the rights and interests of the shareholders". Article 27. The resources of the rights and interests of the owners include the capital invested by the owners, the gains and losses that may be directly included in the rights and interests of the owners, retained earnings, etc. The term "the gains and losses that may be directly included in the rights and interests of the owners" refers to the gains or losses which should not be included in the profits and losses of the current period, which will result in the increase or decrease of the rights and interests of the owners and which are irrelevant to the capital invested by the owners or the profits distributed to the owners. The term "gains" refers to the inflow of economic benefits which are formed by the non-routine activities of the enterprise, which will result in the increase of the rights and interests of the owners and which are irrelevant to the capital invested by the owners. The term "loss" refers to the outflow of economic benefits which are formed by the non-routine activities of the enterprise, which will result in the decrease of the rights and interests of the owners and which are irrelevant to the capital invested by the owners. Article 28. The amount of the rights and interests of the owners depends on the measurement of the assets and liabilities. Article 29. The items of the rights and interests of the owners shall be listed into the balance sheet. CHAPTER VI INCOMES Article 30. The term "income" refers to the total inflow of economic benefits which are formed by the routine activities of the enterprise, which will result in the increase of the rights and interests of the owners, and which are irrelevant to the capital invested by the owners. Article 31. No income may be recognized unless any economic benefit is likely to flow into the enterprise and will result in the increase of assets or decrease of liabilities of the enterprise, and the inflow amount of the economic benefit can be reliably calculated. Article 32. Any item, which meets the definition and recognition conditions of income shall be listed into the profit statement. CHAPTER VII EXPENSES Article 33. The term "expenses" refers to the total outflow of economic benefits which are incurred in the routine activities, which will result in the decrease of the rights and interests of the owners and which will be irrelevant to the profits to be distributed to the owners. Article 34. No expense may be recognized unless any economic benefit is likely to flow out of the enterprise and will result in the decrease of assets or increase of liabilities of the enterprise, and the outflow amount of the economic benefit can be reliably calculated. Article 35. With regard to the expenses which are incurred by an enterprise for manufacturing products or providing labor services and which may fall into the scope of product cost or labor cost, the cost of the product which has already been sold or the cost of the labor service which has already been provided shall be included in the profits and incomes of the current period when the product sale income or labor service income is confirmed. Any disbursement of an enterprise, which will not bring in any economic benefit or which can bring in any economic benefit but does not satisfy or no longer satisfies the asset recognition conditions, shall be recognized as an expense when it is incurred and shall be included in the profits and losses of the current period. With regard to any transaction or event of an enterprise that make the enterprise bear a liability which is not be recognized as an asset, this transaction or event shall be recognized as an expense on its occurrence and shall be included in the profits and losses of the current period. Article 36. Any item, which meets the definition and recognition conditions of expenses shall be listed in the profit statement. CHAPTER VIII PROFITS Article 37. The term "profits" refers to the operating results of an enterprise within a certain accounting period. The profits include the net amount after deducting the expenses, and the gains and losses which are directly included in the profits of the current period. Article 38. The "gains and losses which are directly be included in the profits and losses of the current period" refer to the gains and losses which shall be included in the profits and losses of the current period, which will cause the increase or decrease of the rights and interests of the owners and which are irrelevant to the capital invested by the owners or to the profits distributed to the owners. Article 39. The amount of profits shall depend on the measurement of incomes and expenses, and the amount of gains and losses directly included in the profits of the current period. Article 40. The profit items shall be listed in the profit statements. CHAPTER IX ACCOUNTING MEASUREMENT Article 41. When enterprise records the accounting elements, which meet the recognition conditions, in the accounts and list them in the accounting statements and their annotations (also referred to as the financial and accounting statements, the same hereafter), it shall make measurements according to the accounting measurement attributes. Article 42. The accounting measurement attributes mainly include: (1) Historical costs. Under the method historical costs, the assets are calculated on the basis of the amount of cash or cash equivalents, or fair value of the considerations paid for the purchase of assets. The liabilities are calculated on the basis of the amount of the money or assets which is actually received due to undertaking current obligations, or the contract amount due to undertaking current obligations, or the amount of cash or cash equivalent to pay for the expected liabilities arising out of the daily activities. (2) Replacement costs. Under the method of replacement costs, the assets are calculated on the basis of the amount of cash or cash equivalents paid for the purchase of identical or similar assets. The liabilities are calculated on the basis of the amount of cash or cash equivalents which are paid for the liabilities at the present time. (3) Net realizable value. Under the method of net realizable value, the assets are calculated on the basis of the receivable amount of cash or cash equivalent in the normal sale after deducting the estimated cost of completion of an asset, estimated sale expense and relevant taxes. (4) Present value. Under the method of present value, the assets are calculated on the basis of the amount of future net in-flow cash to be generated from the expected continuous use and final disposal. The liabilities are calculated on the basis of the amount of amount of the future net out-flow of cash to be repaid within the expected time period. (5) Fair value. Under the method of fair value, the assets and liabilities are calculated on the basis of the amount of asset exchange or debt repayment in fair transactions between knowledgeable parties at their own free will. Article 43. When an enterprise measures the accounting elements, generally it shall adopt the historical costs. If it adopts the net realizable value, present value or fair value, it ensures that the amount of the accounting elements it determines can obtain reliable measurement results. CHAPTER X FINANCIAL ACCOUNTING STATEMENTS Article 44. The term "financial accounting statements" refers to the documents an enterprise offers to the outside to reflect the financial status of the enterprise on a particular date, the operating results and cash flow during a certain accounting period, and other accounting information. The financial accounting statements include the accounting statements and their annotations, and other relevant information and materials that shall be disclosed in the financial accounting statements. The accounting statements shall at least include the balance sheets, profit statements and cash flow statements. It is allowed for a small enterprise to exclude cash flow statements from the accounting statements. Article 45. The term "balance sheet" refers to the accounting statement that reflects the financial status of an enterprise on a particular date. Article 46. The term "balance sheet" refers to the accounting statement that reflects the operating results of an enterprise within a certain accounting period. Article 47. The term "cash flow statement" refers to the accounting statement that reflect the inflows and outflows of cash and cash equivalent in an enterprise within a certain accounting period. Article 48. The term "annotations" refers to the further descriptions about the items listed in the accounting statements and explanations about the items not listed in these statements. CHAPTER XI SUPPLEMENTARY PROVISIONS Article 49. The power to interpret these Standards shall remain with the Ministry of Finance. Article 50. These Standards shall come into force as of January 1, 2007. |
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