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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II REVENUE FROM THE SALE OF GOODS CHAPTER III REVENUE FROM RENDERING SERVICES CHAPTER IV REVENUE FROM REMISE OF RIGHT TO USE ASSETS CHAPTER V DISCLOSURE CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the recognition and measurement of the revenues, and the disclosure of the relevant information, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. The term "revenue" refers to the gross inflow of economic benefits arising in the course of the ordinary activities of an enterprise, which may increase of the owner's equities and is irrelevant to the capital of the owner. The revenues as mentioned in these Standards include those from the sale of goods, rendering services, and remise of the right to use assets. The prices charged by an enterprise on behalf of third parties shall be treated as liabilities rather than revenue. Article 3. The revenue arising from long-term equity investments, construction contracts, leases, original insurance contracts, re-insurance contracts, etc. shall be governed by other relevant accounting standards. CHAPTER II REVENUE FROM THE SALE OF GOODS Article 4. No revenue from the sale of goods may be recognized unless the following conditions are met simultaneously: (1) The enterprise has transferred to the buyer the significant risks and rewards of ownership of the goods; (2) The enterprise retains neither continuing managerial involvement which usually relates to the ownership nor exerts effective control over the goods sold; (3)The relevant amount of revenue can be measured reliably; (4) The economic benefits related to the transaction will flow into the enterprise; and (5)The relevant costs incurred or to be incurred can be measured reliably. Article 5. An enterprise shall determine the revenue rising from the sale of goods according to the received or receivable price stipulated in the contract or agreement signed by the enterprise and the buyer, except that the received or receivable amount as stipulated in the contract or agreement is unfair. If the collection of the price as stipulated in the contract or agreement is delayed and if it is of the financing nature, the revenue from the sale of goods shall be determined according to the fair value of the receivable price as stipulated in the contract or agreement. The difference between the price stipulated in the contract or agreement and its fair value shall be amortized within the period of the contract or agreement through the real interest method and shall be recorded in the current profits and losses. Article 6. If the sale of goods involves any cash discount, the revenue from the sale of goods shall be determined according to the amount prior to the deduction of the cash discount. The cash discount shall be recorded in the current profits and losses when it is actually incurred. The term "cash discount" refers to the amount of reduction of debt provided by a creditor to a debtor in order to encourage the debtor to make payment within a prescribed period. Article 7. If the sale of goods involves any trade discount, the revenue from the sale of goods shall be determined according to the amount prior to the deduction of the trade discount. The term "trade discount" refers to a discount on the listed price granted by an enterprise for the purpose of promoting the sale of goods. Article 8. Any sales allowance arising from any goods which have been sold and of which the revenue from the sale has been recognized by the enterprise shall offset against the current revenue from the sale of goods. The sales allowances which fall within the scope of events occurring after the balance sheet date shall be governed by the Accounting Standards for Enterprises No. 29-Events Occurring after the Balance Sheet Date. The term "sales allowance" refers to the amount of reduction in the sales price because of the poor quality of the goods to be sold by an enterprise, or for other reasons. Article 9. Any sales return arising from any goods which have been sold and of which the revenue from the sale has been recognized by the enterprise shall offset against the current revenue from the sale of goods. The sales returns which fall within the scope of events occurring after the balance sheet date shall be governed by the Accounting Standards for Enterprises No. 29-Events Occurring after the Balance Sheet Date. The term "sales return" refers to the return of goods sold by an enterprise because of the goods' poor quality or inconformity with the required type, or for other reasons. CHAPTER III REVENUE FROM RENDERING SERVICES Article 10. If an enterprise can, on the balance sheet date, reliably estimate the outcome of a transaction involving the services it renders, it shall recognize the revenue from rendering services through the percentage-of-completion method. The term "percentage-of-completion method" refers to a method to recognize the revenues and expenses on the basis of the stage of completion under a transaction involving the rendering of services. Article 11. The expression "the outcome of a transaction involving the rendering of services can be reliably measured" means that the following conditions are satisfied simultaneously: (1) The amount of revenue can be measured reliably; (2) The relevant economic benefits are likely to flow into the enterprise; (3) The stage of completion under the transaction can be measured reliably; and (4) The costs incurred or to be incurred in the transaction can be measured reliably. Article 12. An enterprise may adopt the following methods to determine the stage of completion under the transaction involving the rendering of services: (1) The measurement of the work completed; (2) The percentage of the services rendered against the total services to be rendered; and (3) The percentage of the costs incurred against the estimated total costs. Article 13. An enterprise shall determine the total revenue from the rendering of services according to the received or to-be-received price of the party that receives the services as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. An enterprise shall, on the balance sheet date, determine the current revenue from rendering services according to the amount of multiplying the total amount of revenues from rendering services by the stage of completion then deducting the accumulative revenues from the rendering of services which have been recognized in the previous accounting periods. At the same time, the enterprise shall carry forward the current cost of services according to the sum of multiplying the total amount of revenues arising from the rendering of services by the stage of completion and then deducting the accumulative revenues from the rendering of services. Article 14. If an enterprise cannot, on the balance sheet date, reliably measure the result of a transaction involving the rendering of services, it shall treat it according to the following circumstances, respectively: (1) If the cost of services incurred is expected to be recovered, the revenue from the rendering of services shall be recognized according to the amount of the cost of services incurred, and the cost of services shall be carried forward at a same amount; or (2) If the cost of services incurred is not expected to be recovered, the cost incurred should be recorded in the profits and losses of the current period, and no revenue may be recognized. Article 15. Where a contract or agreement concluded between enterprises involves the sale of goods and rendering of services, if the part of sale of goods and the part of rendering services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be treated as sale of goods and the part of rendering services shall be treated as rendering services. If the part of sale of goods and the part of rendering services can not be distinguished from each other, or if the part of sale of goods and the part of rendering services can be distinguished from each other but can not be measured respectively, both parts shall be treated as sale of goods. CHAPTER IV REVENUE FROM REMISE OF RIGHT TO USE ASSETS Article 16. The revenue from remise of right to use assets includes interest revenue and royalty revenue. Article 17. No revenue from remise of right to use assets may be recognized unless the following conditions are satisfied simultaneously: (1) The relevant economic benefits are likely to flow into the enterprise; and (2) The amount of revenues can be measured reliably. Article 18. An enterprise shall determine the amount of revenues from the remise of right to use assets in light of the following circumstances, respectively: (1) The amount of interest revenue should be measured based on the length of time for which the enterprise's cash is used by others and the actual interest rate; or (2) The amount of royalty should be measured according to the period and method of charging as stipulated in the relevant contract or agreement. CHAPTER V DISCLOSURE Article 19. An enterprise shall, in its notes, disclose the following information related to the revenue: (1) The accounting policy adopted for the recognition of revenues, including the method for the determination of the stage of completion under the transaction involving the rendering of services; (2) The amount of revenues from the sale of goods, rendering services, interest and royalty recognized in the current period. |
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