Regulations on Financial Accounting Reports of Enterprises

Regulations on Financial Accounting Reports of Enterprises Decree of the State Council of the People's Republic of China (No. 287) The Regulations on Financial Accounting Reports of Enterprises are hereby promulgated and shall be effective as of January 1, 2001 Premier, Zhu Rongji June 21, 2000 Regulations on Financial Accounting Reports of Enterprises Chapter I General Provisions Article 1 These Regulations are formulated for the purposes of standardizing the financial accounting reports of enterprises and ensuring the authenticity and completeness of financial accounting reports and in accordance with the Accounting Law of the People's Republic of China . Article 2 In compiling and tendering their financial accounting reports, enterprises (including companies, the same hereinafter) shall comply with these Regulations. The financial accounting reports as referred to in these Regulations mean the documents tendered by an enterprise which shall reflect its financial condition on a specific date and its operating result and cash flow within a certain period of accounting. Article 3 No enterprise may compile and tender a financial accounting report which is false or conceals any important fact. The principal of the enterprise shall be responsible for the authenticity and completeness of financial accounting reports of his own enterprise. Article 4 No organization or individual may instigate, instruct or force an enterprise to compile and tender a financial accounting report which is false or conceals any important fact. Article 5 Certified public accountants and public accounting firms shall audit the financial accounting reports of enterprises in accordance with the provisions of relevant laws, administrative regulations and working rules of certified public accountants, and shall be responsible for the audit reports they issued. Chapter II Composition of Financial Accounting Reports Article 6 The financial accounting reports shall be classified into the annual, semi-annual, quarterly and monthly financial accounting reports. Article 7 The annual or semi-annual financial accounting report shall include ; (1) the accounting statement; (2) the explanatory note to the accounting statement; and (3) the financial condition statement. The accounting statement shall include the balance sheet, the profit statement, the cash flow statement and the related schedules. Article 8 Generally, the quarterly or monthly financial accounting report means the accounting statement only, which shall include the balance sheet and the profit statement at least. If the provisions of the State on the unified accounting system require the compilation of the explanatory note to the accounting statement in the quarterly and monthly financial accounting reports, these provisions shall govern. Article 9 The balance sheet is the statement which reflects the financial situation of the enterprise on a specific date. Assets, liabilities and owner's equity (or shareholder's equity, the same hereinafter) shall be grouped and itemized in the balance sheet. The definition and itemization of assets, liabilities and owner's equity in the balance sheet shall comply with the following provisions; (1) Assets mean the resources that are created from its transactions or events in the past and owned or controlled by the enterprise and can generate the anticipated economic benefits for it. Assets shall be grouped and itemized in the balance sheet according to their nature of liquidity, including current assets, long-term investment, fixed assets, intangible assets and other assets. The specific assets of banks, insurance companies and non-bank financial institutions, if any, shall be grouped and itemized according to their specific nature. (2) Liabilities mean the present obligations created from its transactions or events in the past, and the fulfillment of such obligations may cause the anticipated outflow of the economic benefits of the enterprise. Liabilities shall be grouped and itemized in the balance sheet according to their nature of liquidity, including current liabilities and long-term liabilities, etc. The specific liabilities of banks, insurance companies and nonbank financial institutions, if any, shall be grouped and itemized according to their specific nature. (3) Owner's equity means the economic benefits enjoyed by the owner from the assets of the enterprise, and its amount shall be the remaining amount of assets after deducting liabilities. Owner's equity shall be itemized in the balance sheet under the titles such as the paid in investment (or in stock), paid in surplus, surplus from profit and undistributed profit. Article 10 The profit statement is the statement which reflects the operating result of the enterprise within a certain period of accounting. Receipts, costs and the composition of profit shall be grouped and itemized in the profit statement. The definition and itemization of receipts, costs and profit in the profit statement shall comply with the following provisions: (1) Receipts mean the gross inflow of economic benefits arising in the course of daily activities of the enterprise such as sale of goods, supply of services and transfer of the assets-use right. Receipts shall not include the amounts collected on behalf of the third party or the customer. Receipts shall be itemized in the profit statement according to its significance. (2) Costs mean the outflow of economic benefits arising in the course of daily activities of the enterprise such as sale of goods and supply of services. Costs shall be itemized in the profit statement according to their nature. (3) Profit means the operating result of the enterprise within a certain period of accounting. Profit shall be grouped and itemized in the profit statement according to the composition of profit such as operating profit, total profit and net profit. Article 11 The cash flow statement is the statement which reflects the inflow and outflow of cash and cash equivalents (hereinafter referred to as the cash) of the enterprise within a certain period of accounting. Cash flow shall be grouped and itemized in the cash flow statement under the titles of operating, investing and financing activities. The definition and itemization of operating, investing and financing activities in the cash flow statement shall comply with the following provisions: (1) Operating activities mean all transactions and events other than investing or financing activities of the enterprise. Cash flow under the title of operating activities shall be itemized in the cash flow statement according to the nature of cash inflow and outflow in the operating activities; the operating activities of banks, insurance companies and non-bank financial institutions shall be itemized according to their specific nature. (2) Investing activities mean the purchase and construction of long-term assets and the investments not included in cash equivalents and the disposal of the enterprise. Cash flow under the title of investing activities shall be itemized in the cash flow statement according to the nature of cash inflow and outflow in the investing activities. (3) Financing activities mean the activities that cause the change in the size and composition of the capital and debts of the enterprise. Cash flow under the title of financing activities shall be itemized in the cash flow statement according to the nature of cash inflow and outflow in the financing activities. Article 12 The related schedules are the supplementary statements which reflect the financial condition, operating result and cash flow of the enterprise, and shall mainly include the profit distribution statement and other schedules as required by the unified accounting system of the State. The profit distribution statement is the statement that reflects the distribution of net profit realized and profit undistributed in the past years or recover losses of the enterprise within a certain period of account......