Chapter Ⅲ Assets



Article 22. Assets are economic resources, which are measurable by money value, and which are owned or controlled by an enterprise, including all property, rights as a creditor to others, and other rights.

Article 23. For accounting treatment, assets are normally divided into current assets, long-term investments, fixed assets, intangible assets, deferred assets and other assets.



Article 24. Current assets refer to those assets which will be realized or consumed within one year of their acquisition, or within an operating cycle longer than a year. They include cash, cash deposits, short-term investments, accounts receivable, prepayments, and inventories, etc..



Article 25. Cash and all kinds of deposits shall be accounted for according to the actual amount of receipt and payment.



Article 26. Short-term investments refer to various of marketable securities, which can be realized at any time and will be held less than a year, as well as other investment with a life of no longer than a year.



Marketable securities shall be accounted for according to historical cost as obtained.



Income received or receivable from marketable securities in current period and the difference between the receipt obtained from securities sold and book cost shall be all accounted for as current profit or loss.



Marketable securities shall be shown in book balance in accounting statement.



Article 27. Receivables and prepayments include: notes receivable, accounts receivable, other receivables, accounts prepaid and prepaid expenses, etc..



Receivables and prepayments shall be accounted for according to actual amount.



Provision for bad debts may be set up on accounts receivable. The provision for bad debts shall be shown as a deduction item of accounts receivable in the financial statement.



All receivables and prepayments shall be cleared and collected on time, and shall be checked with related parties periodically. Any accounts receivable, proved to be definitely uncollectible according to state regulations, shall be recognised as bad debts and written off against provision for bad debts or charged to current profit or loss, if such provision is not set up.



Prepaid expenses shall be amortized according to period benefiting, and the balance shall be shown separately in accounting statement.



Article 28. Inventories refer to merchandise, finished goods, semifinished goods, goods in process, and all kinds of materials, fuels, containers, low-va1ue and perishable articles and so on that stocked for the purpose of sale, production or consumption during the production operational process.



All inventories shal1 be accounted for at historical cost as obtained. Those enterprises keeping books at planned cost or norm cost in daily accounting shall account the cost variances and adjust planned cost (or norm cost) into historical cost periodically.



When inventories issuing, enterprises may account them under the following methods: first-in first-out, weighted average, moving average, specific identification, last-in first-out, etc..



All inventories shall be taken stock periodically. If any overage, shortage and out-of-date, deterioration and damage that need to be scrapped shall be disposed within the year and accounted into current profit or loss.



All the inventories shall be disclosed at historical cost in accounting statement.



Article 29. Long-term investment refers to the investment impossible or not intended to be realized within a year, including shares investment, bonds investment and other investments.



In accordance with different situation, shares investment and other investments shall be accounted for by cost method or equity method respectively.



Bonds investment shall be accounted for according to actual amount paid. The interest accrued contained in the actually paid amount shall be accounted for separately.



Where bonds are acquired at a premium or discount, the difference between the cost and the face value of the bonds shall be amortized over the periods to maturity of the bonds.



Interest accrued during the period of bonds investment and the difference between the amount of principal and interest received on bonds sold and their book cost and interest accrued but not yet received shall be accounted for as current profit and loss.



Shares investment, bonds investment and other investments shall be shown separately in accounting statements at book balance.



Bonds investment matured within a year shall be shown in the accounting statements separately under the caption of current assets.



Article 30. Fixed assets refer to the assets whose useful life is over one year, unit va1ue is above the prescribed criteria and where original physical form remains during the process of utilization, including building and structures, machinery and equipment, transportation equipment, tools and implement, etc..



Fixed assets sha1l be accounted for at historical cost as obtained. Interest of loan and other related expenses for acquiring fixed assets, and the exchange difference from conversion of foreign currency loan, if incurred before the assets not having been put into operation or after been put into operation but before the final account for completed project is made, shall be accounted as fixed assets value; if incurred after that, shall be accounted for as current profit or loss.



Fixed assets coming from donations shall be accounted through evaluation with reference to market price, wear and tear degree or determined the value with relevant evidence provided by contributors. Expenses incurred on receiving those donated fixed assets, shall be accounted for as the fixed assets value.



Fixed assets financed by leasing shall be accounted with reference of the way fixed assets are accounted and shall be explained in notes to the accounting statements.



Depreciation on the fixed assets shall be accounted according to state regulations. On the basis of the original cost, estimated residual value, the useful life of the fixed assets or estimated working capacity, depreciation on the fixed assets shall be accounted for on the straight line method or the working capacity (or output) method. If approved or conforming to relevant regulations, accelerated depreciation method may be adopted.



Fixed assets' original value, accumulated depreciation and its net value shall be shown separately in accounting statement.



The actual expenditures incurred in the purpose of acquiring or technical reforming the fixed assets before available to the users, shall be shown separately as construction in progress in accounting statement.



The fixed assets must be taken inventory periodically. The net profit or loss incurred in discard and disposal, and also overage, shortage of fixed assets shall be accounted as current profit and loss.
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