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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II RECOGNITION AND MEASUREMENT CHAPTER III PRESENTATION CHAPTER I GENERAL PROVISIONS Article 1. For regulating the recognition and measurement of accounting elements, and the presentation of financial statements when the Accounting Standards for Enterprises are initially adopted, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. The phrase "initial adoption of accounting standards for enterprises" refers to that the system of accounting standards is adopted for the first time, including the basic standards, concrete standards and guidelines on the application of accounting standards. Article 3. The changes in accounting policies occurring after the initial adoption of accounting standards for enterprises shall be governed by the Accounting Standards for Enterprises No. 28-Changes in Accounting Policies and Estimates‚ and Corrections of Errors. CHAPTER II RECOGNITION AND MEASUREMENT Article 4. On the date of initial adoption, an enterprise shall reclassify, recognize and measure all assets, liabilities and the owner's equities in accordance with the Accounting Standards for Enterprises and shall prepare a balance sheet for the initial period. When preparing a balance sheet for the initial period, the enterprise shall make no retroactive adjustment to any item except for those to which retroactive adjustments shall be made in accordance with Articles 5 through 19 of these Standards. Article 5. A long-term equity investment on the date of initial adoption shall be treated in light of the following circumstances, respectively: (1) Pursuant to the Accounting Standards for Enterprises No. 20-Business Combination, if a long-term equity investment is generated from a business combination under common control, the unamortized equity investment difference shall be charged off in full, the retained earnings shall be adjusted, and the book balance of the long-term equity investment after the equity investment difference is charged off shall be regarded as the cost recognized on the date of initial adoption; (2) For a long-term equity investment calculated through any equity method other than that as mentioned in Item (1), if there is any equity investment difference on the credit side, it shall be charged off, the retained earnings shall be adjusted, and the book balance of the long-term equity investment after the equity investment difference is charged off on the credit side shall be regarded as the cost recognized on the date of initial adoption. If there is any equity investment difference on the debit side, the book value of the long-term equity investment shall be regarded as the recognition cost on the date of initial adoption. Article 6. If any exact evidence shows that an investment real estate may be measured at fair value, it may be measured at fair value on the date of initial adoption and the retained earnings shall be adjusted on the basis of the difference between its book value and fair value. Article 7. On the date of initial adoption, for the discard expenses which satisfy the conditions for the recognition of expected liabilities and which have not been recorded in the asset costs prior to this date, the asset costs shall be increased and the corresponding liabilities shall be recognized. At the same time, the retained earnings shall be adjusted on the basis of the increased depreciation (depletion). Article 8. For a plan on terminating the labor relationship with an employee which is already existing on the date of initial adoption, if it meets the conditions as described in the Accounting Standards for Enterprises No. 9-Wages and Salaries of Employees for the recognition of expected liabilities, the liability incurred due to the compensation made for the cancellation of the labor relationship with the employee shall be recognized and the retained earnings shall be adjusted. Article 9. For an investment formed in operating the enterprise annuities fund, it shall be measured at a fair value on the date of initial adoption and the retained earnings shall be adjusted on the basis of the difference between its carrying amount and the fair value. Article 10. For a share-based payment of which the vesting date is on or after the date of initial adoption, under the provisions of the Accounting Standards for Enterprises No. 11-Share-based Payment, the retained earnings shall, according to the fair value of the equity instrument, or service provided by any other party or liability assumed by any other party which is calculated and determined on the basis of the equity instrument, be adjusted at the amount of cost incurred during the vesting period prior to the date of initial adoption, and the owner's equities or liabilities shall be increased correspondingly. No retroactive adjustment may be made to any share-based payment made for any exercisable right prior to the date of initial adoption. Article 11. On the date of initial adoption, an enterprise shall, in accordance with the Accounting Standards for Enterprises No. 13-Contingencies, recognize those restructuring obligations which satisfy the conditions for the recognition of expected liabilities as liabilities, and shall adjust the retained earnings. Article 12. On the date of initial adoption, an enterprise shall, under the provisions of the Accounting Standards for Enterprises No. 18-Income Tax, make a retroactive adjustment to the effect of the temporary difference between the carrying amount of an asset or liability and its tax base on income tax, and shall adjust the retained earnings on the basis of the affected amount. Article 13. Except for the following items, no adjustment may be made to the business combinations occurring prior to the date of initial adoption: (1) For a business combination under common control as prescribed in the Accounting Standards for Enterprises No. 20-Business Combination, the amortized value of the originally recognized business reputation shall be charged off in full and the retained earnings shall be adjusted. For a business combination not under common control as described in these Standards, the amortized value of the business reputation on the date of initial adoption shall be recognized as cost, it shall not be amortized any more; (2) As to the business combination occurring prior to the date of initial adoption, if it is stipulated in the combination contract or agreement that the combination cost should be adjusted according to the occurrence of future events, if the future events expected on the date of initial adoption are likely to occur and their effects on the combination cost can be measured reliably, the carrying amount of the already recognized business reputation shall be adjusted on the basis of the affected amount; (3) An enterprise shall, in accordance with the Accounting Standards for Enterprises No. 8-Asset Impairment, conduct an impairment test for the business reputation on the date of initial adoption, if it is impaired, it shall be recognized with the amount after the impairment provision is made and the retained earnings shall be adjusted. Article 14. On the date of initial adoption, an enterprise shall reclassify the financial assets (excluding the investments governed by the Accounting Standards for Enterprises No. 2-Long-term Equity Investments) into financial assets, held-to-maturity investments, loans, receivables as well as financial assets available for sale which are measured at their fair value and of which the changes are recorded in the profits and losses of the current period: (1) For those classified as financial assets which are measured at their fair value and of which the changes are recorded in the profits and losses of the current period or which are available for sale, they shall be measured at their fair value, and the retained earnings shall be adjusted on the basis of the difference between the carrying amount and fair value; (2) For those classified as held-to-maturity investments, loans and receivables, they shall, as of the date of initial adoption, be measured at their amortized cost in the subsequent accounting periods through the effective interest rate method. Article 15. For a financial liability which on the date of first adoption is designated to be measured at its fair value and of which the changes are recorded in the profits and losses of the current period, it shall be measured at its fair value on the date of initial adoption and the retained earnings shall be adjusted on the basis of its carrying amount and fair value. Article 16. For a derivative financial instrument (including hedging instruments) which has not been recognized in the balance sheet or which has been measured at its cost, it shall be measured at its fair value on the date of initial adoption and the retained earnings shall be adjusted. Article 17. For an embedded financial instrument which shall be separated from the mixed instrument under the Accounting Standards for Enterprises No. 22-Recognition and Measurement of Financial Instruments, it shall, on the date of initial adoption, be separated from the mixed instrument and shall be treated separately, however, unless it is difficult to reasonably determine the fair value of the embedded derivative financial instrument. For a non-derivative financial instrument with liability and equity components which is issued by an enterprise, the liability component shall, on the date of initial adoption, be separated from equity component under the Accounting Standards for Enterprises No. 37-Presentation of Financial Instruments, unless it is difficult to reasonably determine the fair value of the liability component. Article 18. On the date of initial adoption, for the hedges which do not meet the conditions for adopting the hedge accounting methods as described in the Accounting Standards for Enterprises No. 24-Hedging, the adoption of the original hedge accounting methods shall be terminated and shall be treated in accordance with the Accounting Standards for Enterprises No. 24-Hedging. Article 19. A cedant enterprise of reinsurance businesses shall, on the date of initial adoption, recognize the corresponding provisions which should be allocated back to the reinsurance acceptors as assets under the Accounting Standards for Enterprises No. 26-Reinsurance Contracts and shall adjust the carrying amount of each provision. CHAPTER III PRESENTATION Article 20. During the period of preparation of the first annual financial statements after the date of initial adoption in accordance with the Accounting Standards for Enterprises, an enterprise shall, pursuant to the Accounting Standards for Enterprises No. 30-Presentation of Financial Statements and the Accounting Standards for Enterprises No. 31-Cash Flow Statements, prepare a balance sheet, profit statement, cash flow statement, statement on changes of the owner's equities, as well as the notes. If the enterprise provides consolidated financial statements to outsiders, it shall comply with the provisions of the Accounting Standards for Enterprises No. 33-Consolidated Financial Statements. If the enterprise provides interim financial reports during the period covered by the first annual financial statements, it shall comply with the provisions of the Accounting Standards for Enterprises No. 32-Interim Financial Reports. An enterprise shall, in its notes, disclose the changes in the amount of the items in the financial statements upon initial adoption of the Accounting Standards for Enterprises. Article 21. The first annual financial statements shall at least include comparative information of the previous year presented under the Accounting Standards for Enterprises. If there is any change in the items of financial statements to be presented, the comparative figures of the previous year shall be adjusted, unless it is impractical. For a subsidiary which was not included in the scope of consolidation, but should have been included therein under the Accounting Standards for Enterprises No. 33-Consolidated Financial Statements, the enterprise shall list it into the scope of consolidation for the comparative consolidated financial statements of the previous year. For a subsidiary which was included in the scope of consolidation, but should have not been included therein under these Standards, the enterprise shall not list the subsidiary in the scope of consolidation for the comparative consolidated financial statements of the previous year. The minority shareholders' interests presented in the comparative financial statements of the previous year shall, in pursuance of these Standards, be presented under the category of the owner's equities. For an enterprise that shall present the earnings per share, it shall, under the Accounting Standards for Enterprises No. 34-Earnings Per Share, calculate and present the earnings per share of the previous year in the comparative financial statements. For an enterprise that shall disclose segment information, it shall, pursuant to the Accounting Standards for Enterprises No. 35-Segment Reports, disclose the segment information of the previous year in the comparative financial statements. |
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