MOF Issues Interpretation of the Accounting Standards for Business Enterprises No. 20

The Ministry of Finance (MOF) recently issued the Interpretation of the Accounting Standards for Business Enterprises No. 20 (the "Interpretation"), effective from the date of issuance.

The Interpretation aims to address practical accounting issues encountered by enterprises and keep in line with the International Financial Reporting Standards (IFRS). It sets forth the specific provisions on the assessment of the contractual cash flow characteristics of financial assets, as well as the accounting treatment and disclosure requirements in circumstances where a currency lacks exchangeability. With respect to the assessment of contractual cash flow characteristics of financial assets, the Interpretation clarifies the relevant requirements from both the accounting treatment perspective and the transition arrangement perspective. In particular, for financial assets with non-recourse features, when determining whether the contractual cash flows are solely payments of principal and interest on the principal amount outstanding, an enterprise shall assess the linkage between the specified underlying assets or their cash flows and the contractual cash flows of the financial asset (i.e., "look-through" assessment), and consider how such linkage may be affected by other contractual arrangements, including subordinated debt or equity instruments issued by the debtor.



(Source: http://kjs.mof.gov.cn/zhengcefabu/202606/t20260615_3991686.htm)

Note: The link to the Chinese official website of the document is for your reference.