In accordance with the "Accounting Law of the People's Republic of China" and other relevant laws and administrative regulations, the Ministry of Finance issued the Basic Standards for Enterprise Accounting on 2006/2/15, effective as of 2007/1/1. It was amended on 2014/7/23 pursuant to the "Decision of the Ministry of Finance on Amending the 'Basic Standards for Enterprise Accounting'".
I. General Provisions
These Standards apply to enterprises established within the People's Republic of China (including corporations). The Accounting Standards for Business Enterprises comprise the Basic Standard and Specific Standards. The formulation of Specific Standards shall comply with this Basic Standard.
Enterprises shall prepare financial reports to provide accounting information on financial position, operating results, and cash flows for users of such reports. These reports reflect the fulfillment of management's stewardship responsibilities and assist users in making economic decisions.
Basic Assumptions and Foundations
- • Based on the going concern assumption
- • Define accounting periods (annual and interim)
- • Measured in currency
- • Based on the accrual basis
- • Use double-entry bookkeeping
II. Requirements for Quality of Accounting Information
Reliability
Base actual transactions or events and faithfully reflect all accounting elements.
Relevance
Relevant to users' economic decisions; aids in evaluation or forecasting.
Comprehensibility
Clear and easy to understand and use
Comparability
Consistent accounting policies within the same enterprise across periods; uniform standards across different enterprises.
Substance over form
Recognize, measure, and report transactions or events based on their economic substance.
Importance
Reflect all significant transactions or matters
Caution
Exercise due caution: do not overstate assets or income, nor understate liabilities or expenses.
Timeliness
Confirm, measure, and report promptly. Do not report early or late.
III. Accounting Elements
Enterprises shall identify accounting elements based on the economic characteristics of transactions or events. Accounting elements include assets, liabilities, owner's equity, revenue, expenses, and profit.
Assets
Resources acquired from past transactions or events, owned or controlled by the enterprise, and expected to generate future economic benefits.
Liabilities
A present obligation arising from past transactions or events, expected to result in an outflow of economic benefits.
Owner's Equity
The residual interest in the assets of an enterprise after deducting its liabilities, attributable to owners. It includes contributed capital, gains and losses recognized directly in equity, retained earnings, and other similar items.
Income
Total inflow of economic benefits arising from an enterprise's ordinary activities that increases equity and is unrelated to capital contributions by owners.
Cost
Outflows of economic benefits arising in the ordinary course of business that reduce equity and are not related to distributions to owners.
Profit
A company's financial performance over a specific accounting period, including net income after deducting expenses from revenues, as well as gains and losses directly recognized in the current period's profit.
IV. Accounting Measurement Attributes
1. Historical Cost
Assets are measured at the amount of cash or cash equivalents paid at acquisition; liabilities are measured at the amount of cash or assets received in settlement of the present obligation.
2. Reset Cost
Assets are measured at the amount of cash or cash equivalents that would be paid to acquire an identical or similar asset currently.
3. Net Realizable Value
Assets are measured at the amount of cash or cash equivalents that would be received from their normal sale, less estimated costs to complete, estimated selling expenses, and related taxes.
4. Present Value
Assets are measured at the present value of estimated future net cash inflows expected from their continued use and ultimate disposal.
5. Fair Value
Assets and liabilities are measured at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Note: When measuring accounting elements, enterprises shall generally use historical cost. If other measurement attributes are used, the determined amounts of accounting elements must be ascertainable and reliably measurable.
V. Financial Accounting Report
A financial accounting report is a document provided by an enterprise to external parties, reflecting its financial position as of a specific date, along with its operating results and cash flows for a given accounting period.
Components of Financial Reports
- • Balance Sheet: reflects the company's financial position as of a specific date
- • Income Statement: Reflects a company's financial performance over a specific accounting period
- • Cash Flow Statement: reflects the inflow and outflow of cash and cash equivalents for an enterprise over a specific accounting period
- • NotesFurther explanation of items presented in the financial statements
Regulatory Document Attachment
Enterprise Accounting Standards — Basic Standards (PDF)