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Ministry of Finance Amends Accounting Standards for Financial Instruments

The Ministry of Finance has released three new accounting standards – Accounting Standards for Enterprises No. 22: Recognition and Measurement of Financial Instruments, Accounting Standards for Enterprises No. 23: Transfer of Financial Instruments and Accounting Standards for Enterprises No. 24: Hedging Accounting.

Their introduction marks moves by the Ministry of Finance to implement the Central Economic Work Conference’s directives relating to the prevention and control of financial risks and the strengthening of the management of financial assets and liabilities. Among the areas affected by the new accounting standards is a reduction of the number of classifications of financial assets from four to three, a move said to make the demarcation more objective and the accounting process more uniform. In other changes, the term “incurred loss” has been revised to “expected loss” in order to ensure provision for impairment of financial assets is made on schedule and in full amount, while exposing, preventing and controlling the credit risks related to financial assets. The provisions relating to hedging accounting have also been amended to ensure that they more accurately reflect the risk management activities of the enterprises concerned.

These new accounting standards will come into force as of 1 January 2018 for any enterprises listed concurrently at home and abroad, as well as for any enterprise listed abroad that has adopted international financial reporting or accounting standards with regard to preparing their financial reports. In the case of enterprises listed solely on the domestic market, they will apply from 1 January 2019 onwards, while for non-listed enterprises they will apply from 1 January 2021. All relevant businesses are advised to adopt these measures at their earliest convenience. Transitional measures for insurance companies looking to put these accounting standards into practice will be formulated separately.

Please see the below webpages of the Ministry of Finance for details of the three amended accounting standards in the original Chinese:

Circular on Amendment of Accounting Standards for Enterprises No. 22 – Recognition and Measurement of Financial Instruments

Circular on Amendment of Accounting Standards for Enterprises No. 23 – Transfer of Financial Assets

Circular on Amendment of Accounting Standards for Enterprises No. 24 – Hedging Accounting

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