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CHAPTER I GENERAL PROVISIONS CHAPTER II BASIC REQUIREMENTS CHAPTER III CASH FLOWS ARISING FROM OPERATING ACTIVITIES CHAPTER IV CASH FLOWS ARISING FROM INVESTING ACTIVITIES CHAPTER V CASH FLOWS ARISING FROM FINANCING ACTIVITIES CHAPTER VI DISCLOSURE CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the preparation and presentation of cash flow statements, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. The term "cash flow statement" refers to a statement which reflects the inflows and outflows of cash and cash equivalents of an enterprise in a certain accounting period. The term "cash" refers to cash on hand and deposits that are readily available for payment. The term "cash equivalents" refers to short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. The cash as mentioned in these Standards includes cash and cash equivalents unless the cash equivalents are mentioned simultaneously. Article 3. The preparation and presentation of consolidated cash flow statements shall be governed by the Accounting Standards for Enterprises No. 33-Consolidated Financial Statements. CHAPTER II BASIC REQUIREMENTS Article 4. Cash flows statements shall be reported for operating activities, investing activities and financing activities, respectively. Article 5. Cash flows shall be presented on the basis of the total amounts of inflows and outflows of cash. However, the following items shall be presented on the basis of the net amounts: (1) Cash receipts or payments on behalf of customers; (2) Cash inflows and outflows for items which are quick in circulation, large in amounts, and short in maturity; and (3) Items relating to financial enterprises, including short-term loans granted and repayment of principal of such loans, the acceptance of current deposits and the repayment of the principal of such deposits, financial institution deposits and deposits from or to other financial institutions, funds borrowed from or lent to other financial institutions, purchase and sale of securities, etc. Article 6. Some extraordinary items, such as a loss from a natural disaster or an insurance claim shall, on the basis of their nature, be classified as arising from the cash flow category of operating activities, investing activities or financing activities and shall be presented separately. Article 7. The exchange rate used for the translation of cash flows in a foreign currency and the cash flows of a foreign subsidiary shall be the spot exchange rate on the date of the cash flows or shall be the rate which is determined through a systematic and reasonable method and which is approximate to the spot exchange rate. The effect of a change in exchange rate on cash shall, as an adjustment item, separately presented in the cash flow statement. CHAPTER III CASH FLOWS ARISING FROM OPERATING ACTIVITIES Article 8. An enterprise shall present the cash flows arising from operating activities through the direct method. The term "operating activities" refers to all transactions and events other than the investing and financing activities of an enterprise. The term "direct method" refers to a method whereby major classes of cash receipts and cash payments are presented for the cash flows arising from operating activities. Article 9. The information about the cash flows arising from the relevant operating activities may be acquired through either of the following ways: (1) The accounting records of the enterprise; or (2) Adjusting the business revenue, business costs and other items in the income statement according to the following items: 1. The changes in the investors and operating receivables and payables in the current period; 2. The depreciation of fixed assets, amortization of intangible assets, provision for asset impairment, and other non-cash projects; and 3. Other non-cash items falling into the scope of cash flows arising from investing activities or financing activities. Article 10. At least the items reflecting the following information shall be presented separately for the cash flows arising from operating activities: (1) Cash receipts for the sale of goods and the rendering of services; (2) Receipts of tax refunds; (3) Cash receipts relating to other operating activities; (4) Cash payments for goods acquired and services received; (5) Cash paid to and for employees; (6) Payments of all types of taxes; and (7) Cash payments relating to other operating activities. Article 11. The financial enterprises may, by taking into consideration the industrial features and the actual situation of cash flows, reasonably determine the categories of cash flows arising from operating activities. CHAPTER IV CASH FLOWS ARISING FROM INVESTING ACTIVITIES Article 12. The term "investing activities" refers to those activities of an enterprise, such as the acquisition and disposal of long-term assets and other investments that are not considered to be cash equivalents Article 13. At least the items reflecting the following information shall be presented separately for the cash flows arising from investing activities: (1) Cash receipts from returns of investments; (2) Cash receipts from returns on investments; (3) Net cash receipts from the disposal of fixed assets, intangible assets and other long term assets; (4) Net cash receipts from the disposal of subsidiaries and other business entities; (5) Other cash receipts relating to investing activities; (6) Cash payments for the acquisition of fixed assets, intangible assets and other long term assets; (7) Cash payments for investments; (8) Net cash payments for the acquisition of subsidiaries and other business entities; and (9) Other cash payments relating to investing activities. CHAPTER V CASH FLOWS ARISING FROM FINANCING ACTIVITIES Article 14. The term "financing activities" refers to those activities that result in changes in the scale and composition of the capital and debts of an enterprise. Article 15. At least the items reflecting the following information shall be presented separately for the cash flows arising from financing activities: (1) Cash proceeds from investments by others; (2) Cash receipts from debts; (3) Cash receipts relating to other financing activities; (4) Cash repayments for debts; (5) Cash payments for distribution of dividends or profits, or cash payments for interests; and (6) Cash payments relating to other financing activities. CHAPTER VI DISCLOSURE Article 16. An enterprise shall, in its notes, disclose the information about the reconciliation of net profits to cash flows arising from operating activities. It shall at least disclose the following items separately for the reconciliation of net profits to cash flows arising from operating activities: (1) The provision for impairment losses of assets; (2) The depreciation of fixed assets; (3) The amortization of intangible assets; (4) The amortization of long-term deferred expenses; (5) The deferred expenses; (6) The accrued expenses; (7) The gains or losses on the disposal of fixed assets, intangible assets and other long-term assets; (8) The losses on the discard of fixed assets; (9) The gains and losses on the changes in fair value; (10) The financial expenses; (11) The gains or losses arising from investments; (12) The deferred income tax assets and the deferred income tax liabilities; (13) The inventories; (14) The operating receivables; and (15) The operating payables; Article 17. An enterprise shall, in its notes, disclose the following information about the total amounts of acquisition or disposal of subsidiaries and other business entities in the current period: (1) The acquisition or disposal price; (2) The portion of cash payment for the acquisition or disposal; (3) The portion of cash receipt for the acquisition or disposal of subsidiaries and other business entities; and (4) The major classes of non-cash assets and liabilities arising from the acquisition or disposal of subsidiaries and other business entities. Article 18. An enterprise shall, in its notes, disclose the significant investing and financial activities, which do not involve the cash receipts and payments of the current period but affect its financial status or will possibly affect its future cash flows. Article 19. An enterprise shall, in its notes, disclose the following information relating to cash and cash equivalents: (1) The composition of cash and cash equivalents and the amounts thereof in the balance sheets; and (2) The large sums of cash and cash equivalents held by an enterprise that are not available for use by the parent company or by any other subsidiary within the group. |
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