Accounting Regulations of the PRC for Joint Ventures Using Chinese and Foreign Investment (from government website)
Accounting Regulations of the PRC for Joint Ventures Using Chinese and Foreign Investment (from government website)
Accounting Regulations of the PRC on Sino-Foreign Equity Joint Ventures
Cai Kuai [85] No.16
March 4, 1985
Chapter I General Provisions
Article 1 The present Regulations are formulated to strengthen the accounting work of Sino-foreign equity joint ventures, in accordance with the provisions laid down in the Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment, the Income Tax Law of the People's Republic of China Concerning Joint Ventures Using Chinese and Foreign Investment and other relevant laws and regulations.
Article 2 These Regulations are applicable to all Sino-foreign equity joint ventures (the "joint ventures") established within the territory of the People's Republic of China.
Article 3 The public finance departments or bureaus of provinces, autonomous regions and municipalities directly under the Central Government as well as the business regulatory departments of the State Council shall be permitted to make necessary supplements to these regulations on the basis of complying with these regulations and in the light of specific circumstances, and submit the supplements to the Ministry of Finance for the record.
Article 4 Joint ventures shall work out their own enterprise accounting system in accordance with the Regulations and the supplementary provisions made by the relevant public finance department or bureau of the provinces, autonomous regions or municipalities, or by the relevant business regulatory departments of the State Council, and in the light of their specific circumstances and submit their own system to their enterprise regulatory departments, local public finance department and tax authority for the record.
Chapter II Accounting Office and Accounting Staff
Article 5 A joint venture shall set up a separate accounting office with necessary accounting staff to handle its financial and accounting work.
Article 6 A joint venture of large or medium size shall have a controller to assist the president and to take the responsibility in leading its financial and accounting work. A deputy controller may also be appointed when necessary.
A joint venture of relatively large size shall have an auditor responsible for review and examination of its financial receipts and disbursements, accounting documents, accounting books, accounting statements and other relevant data and those of its subordinate branches.
Article 7 The accounting office and accounting staff of a joint venture shall fulfil their duties and responsibilities with due care, make accurate calculation, reflect faithfully the actual conditions, and supervise strictly over all economic transactions, protect the legitimate rights and interests of all the participants of the joint venture.
Article 8 Accounting staff who are transferred or leaving their posts shall clear their responsibility transfer procedures with those who are assuming their positions, and shall not interrupt the accounting work.
Chapter III General Principles For Accounting
Article 9 The accounting work of joint ventures must comply with the laws and regulations of the People's Republic of China.
Article 10 The fiscal year of a joint venture shall run from 1 January to 31 December under the Gregorian calendar.
Article 11 Joint ventures shall adopt debit and credit double entry bookkeeping.
Article 12 The accounting documents, accounting books, accounting statements and the other accounting records of a joint venture shall be prepared accurately and promptly according to the transactions actually taken place, with all required routines done and contents complete.
Article 13 All the accounting documents, accounting books and accounting statements prepared by a joint venture must be written in Chinese. A foreign language mutually agreed by the participants of the joint venture may be used concurrently.
Article 14 In principle, a joint venture shall adopt Renminbi as its bookkeeping base currency. However, a foreign currency may be used as the bookkeeping base currency upon mutual agreement of the participants of a joint venture.
If actual receipts or disbursements of cash, bank deposits, other cash holdings, claims debts, income and expenses, etc. are made in currencies other than the bookkeeping base currency, a record shall also be made in the currencies of actual receipts or disbursements.
Article 15 Joint ventures shall adopt the accrual basis in their accounting. All revenues realised and expenses incurred during the current period shall be recognised in the current period, regardless of whether receipts or disbursements are made. The revenues or expenses not attributable to the current period shall not be recognised as current revenue or expenses, even if they are currently received or disbursed.
Article 16 The revenues and expenses of a joint venture must be matched in its accounting. All the revenues and relevant costs and expenses of a period shall be recognised in the period and shall not be dislocated, advanced or deferred.
Article 17 All the assets of a joint venture shall be stated at their original costs and the recorded amounts are generally not adjusted whether there is any fluctuation in their market prices.
Article 18 A joint venture shall draw clear distinction between capital expenditures and revenue expenditures. All expenditures incurred for the increase of fixed assets and intangible assets are capital expenditures. All expenditures incurred to obtain current revenue are revenue expenditures.
Article 19 Accounting methods adopted by a joint venture shall be consistent from one period to the other and shall not be arbitrarily changed. Changes, if any, shall be approved by the board of directors and submitted to the local tax authority for examination. Disclosure of the changes shall be made in the accounting report.
Chapter IV Accounting for Paid-in Capital
Article 20 The participants of a joint venture shall contribute their share capital in the amount, ratio and mode of capital contribution within the stipulated time limit as provided in the joint venture contract. The accounting for paid-in capital by a joint venture shall be based on the actual amount contributed by each of its participants.
1. For investment paid in cash, the amount and date as received or as deposited into the Bank of China or other banks where the joint venture has opened its bank account shall be the basis for recording the capital contribution.
The foreign currency contributed by a foreign participant shall be converted into Renminbi or further converted into a predetermined foreign currency at the exchange rates quoted on the day of the cash payment by the State Administration of Foreign Exchange Control of the People's Republic of China (hereinafter referred to as the "State Administration of Foreign Exchange Control"). Should the cash Renminbi contributed by a Chinese participant be converted into foreign currency, it shall be converted at the exchange rate quoted by the State Administration of Foreign Exchange Control on the day of the cash payment.
2. For investment in the form of buildings, machinery, equipment, materials and supplies, the amount shown on the examined and verified itemisation list of the assets as agreed upon by each participant and the date of the receipt of the assets shall be the basis of accounting according to the joint venture contract.
3. For investment in the form of intangible assets, i.e. proprietory technology, patents, trade marks, copyright and other franchises, etc. the amount and date as provided in the agreement or contract shall be the basis of accounting.
4. For investment in the form of the right to use sites,the amount and date as provided in the agreement or contract shall be the basis of accounting.
The capital contributed by each participant shall be recorded into the accounts of the joint venture as soon as they are received.
Article 21 The capital amount contributed by the participants of a joint venture shall be validated by Certified Public Accountants registered with the government of the People's Republic of China, who shall render a certificate on capital validation, which shall then be taken by the joint venture as the basis to issue capital contribution certificates to the participants.
Chapter V Accounting Cash and Current Accounts
Omitted
Article 22 A joint venture shall open its deposit accounts in the Bank of China or the other banks within the territory of the People's Republic of China and approved by the State Administration of Foreign Exchange Control or by one of its branches. All foreign exchange receipts must be deposited with the bank in the foreign currency deposit account and all foreign exchange disbursements must be made from the accounts.
Article 23 A joint venture shall set up journals to itemise cash and bank transactions in chronological order. A separate journal shall be set up for each currency if there are several currencies.
Article 24 The accounts receivable, accounts payable and other receivables and payables of a joint venture shall be recorded in separate accounts set up for different currencies. Receivables shall be collected and payables shall be paid in due time and shall be confirmed with the relevant parties periodically. The causes of uncollectible items shall be investigated and the responsibilities thereof shall be determined. Any item proved to be definitely uncollectible through strict management review shall be written off as a bad debt after approval is obtained through reporting procedures specified by the board of directors. No "reserve for bad debts" shall be accrued.
Article 25 For a joint venture using Renminbi as the bookkeeping base currency, its foreign currency deposits, foreign currency loans and other accounts denominated in foreign currency shall be recorded not only in the original foreign currency of the actual receipts and payments, but also in Renminbi converted from the foreign currency at an ascertained exchange rate (using the exchange rate quoted by the State Administration of Foreign Exchange Control).
All additions of foreign currency deposits, foreign currency loans and other accounts denominated in foreign currencies shall be recorded in Renminbi converted at their recording exchange rates, while deductions recorded in Renminbi and converted at their book exchange rates shall be recognised as "foreign exchange gains or losses" (hereinafter referred to as "exchange gains or losses").
The recording exchange rates for the conversion of foreign currency to Renminbi may be the rate prevailing on the day of recording the transaction or on the first day of the month, etc.
......
Cai Kuai [85] No.16
March 4, 1985
Chapter I General Provisions
Article 1 The present Regulations are formulated to strengthen the accounting work of Sino-foreign equity joint ventures, in accordance with the provisions laid down in the Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment, the Income Tax Law of the People's Republic of China Concerning Joint Ventures Using Chinese and Foreign Investment and other relevant laws and regulations.
Article 2 These Regulations are applicable to all Sino-foreign equity joint ventures (the "joint ventures") established within the territory of the People's Republic of China.
Article 3 The public finance departments or bureaus of provinces, autonomous regions and municipalities directly under the Central Government as well as the business regulatory departments of the State Council shall be permitted to make necessary supplements to these regulations on the basis of complying with these regulations and in the light of specific circumstances, and submit the supplements to the Ministry of Finance for the record.
Article 4 Joint ventures shall work out their own enterprise accounting system in accordance with the Regulations and the supplementary provisions made by the relevant public finance department or bureau of the provinces, autonomous regions or municipalities, or by the relevant business regulatory departments of the State Council, and in the light of their specific circumstances and submit their own system to their enterprise regulatory departments, local public finance department and tax authority for the record.
Chapter II Accounting Office and Accounting Staff
Article 5 A joint venture shall set up a separate accounting office with necessary accounting staff to handle its financial and accounting work.
Article 6 A joint venture of large or medium size shall have a controller to assist the president and to take the responsibility in leading its financial and accounting work. A deputy controller may also be appointed when necessary.
A joint venture of relatively large size shall have an auditor responsible for review and examination of its financial receipts and disbursements, accounting documents, accounting books, accounting statements and other relevant data and those of its subordinate branches.
Article 7 The accounting office and accounting staff of a joint venture shall fulfil their duties and responsibilities with due care, make accurate calculation, reflect faithfully the actual conditions, and supervise strictly over all economic transactions, protect the legitimate rights and interests of all the participants of the joint venture.
Article 8 Accounting staff who are transferred or leaving their posts shall clear their responsibility transfer procedures with those who are assuming their positions, and shall not interrupt the accounting work.
Chapter III General Principles For Accounting
Article 9 The accounting work of joint ventures must comply with the laws and regulations of the People's Republic of China.
Article 10 The fiscal year of a joint venture shall run from 1 January to 31 December under the Gregorian calendar.
Article 11 Joint ventures shall adopt debit and credit double entry bookkeeping.
Article 12 The accounting documents, accounting books, accounting statements and the other accounting records of a joint venture shall be prepared accurately and promptly according to the transactions actually taken place, with all required routines done and contents complete.
Article 13 All the accounting documents, accounting books and accounting statements prepared by a joint venture must be written in Chinese. A foreign language mutually agreed by the participants of the joint venture may be used concurrently.
Article 14 In principle, a joint venture shall adopt Renminbi as its bookkeeping base currency. However, a foreign currency may be used as the bookkeeping base currency upon mutual agreement of the participants of a joint venture.
If actual receipts or disbursements of cash, bank deposits, other cash holdings, claims debts, income and expenses, etc. are made in currencies other than the bookkeeping base currency, a record shall also be made in the currencies of actual receipts or disbursements.
Article 15 Joint ventures shall adopt the accrual basis in their accounting. All revenues realised and expenses incurred during the current period shall be recognised in the current period, regardless of whether receipts or disbursements are made. The revenues or expenses not attributable to the current period shall not be recognised as current revenue or expenses, even if they are currently received or disbursed.
Article 16 The revenues and expenses of a joint venture must be matched in its accounting. All the revenues and relevant costs and expenses of a period shall be recognised in the period and shall not be dislocated, advanced or deferred.
Article 17 All the assets of a joint venture shall be stated at their original costs and the recorded amounts are generally not adjusted whether there is any fluctuation in their market prices.
Article 18 A joint venture shall draw clear distinction between capital expenditures and revenue expenditures. All expenditures incurred for the increase of fixed assets and intangible assets are capital expenditures. All expenditures incurred to obtain current revenue are revenue expenditures.
Article 19 Accounting methods adopted by a joint venture shall be consistent from one period to the other and shall not be arbitrarily changed. Changes, if any, shall be approved by the board of directors and submitted to the local tax authority for examination. Disclosure of the changes shall be made in the accounting report.
Chapter IV Accounting for Paid-in Capital
Article 20 The participants of a joint venture shall contribute their share capital in the amount, ratio and mode of capital contribution within the stipulated time limit as provided in the joint venture contract. The accounting for paid-in capital by a joint venture shall be based on the actual amount contributed by each of its participants.
1. For investment paid in cash, the amount and date as received or as deposited into the Bank of China or other banks where the joint venture has opened its bank account shall be the basis for recording the capital contribution.
The foreign currency contributed by a foreign participant shall be converted into Renminbi or further converted into a predetermined foreign currency at the exchange rates quoted on the day of the cash payment by the State Administration of Foreign Exchange Control of the People's Republic of China (hereinafter referred to as the "State Administration of Foreign Exchange Control"). Should the cash Renminbi contributed by a Chinese participant be converted into foreign currency, it shall be converted at the exchange rate quoted by the State Administration of Foreign Exchange Control on the day of the cash payment.
2. For investment in the form of buildings, machinery, equipment, materials and supplies, the amount shown on the examined and verified itemisation list of the assets as agreed upon by each participant and the date of the receipt of the assets shall be the basis of accounting according to the joint venture contract.
3. For investment in the form of intangible assets, i.e. proprietory technology, patents, trade marks, copyright and other franchises, etc. the amount and date as provided in the agreement or contract shall be the basis of accounting.
4. For investment in the form of the right to use sites,the amount and date as provided in the agreement or contract shall be the basis of accounting.
The capital contributed by each participant shall be recorded into the accounts of the joint venture as soon as they are received.
Article 21 The capital amount contributed by the participants of a joint venture shall be validated by Certified Public Accountants registered with the government of the People's Republic of China, who shall render a certificate on capital validation, which shall then be taken by the joint venture as the basis to issue capital contribution certificates to the participants.
Chapter V Accounting Cash and Current Accounts
Omitted
Article 22 A joint venture shall open its deposit accounts in the Bank of China or the other banks within the territory of the People's Republic of China and approved by the State Administration of Foreign Exchange Control or by one of its branches. All foreign exchange receipts must be deposited with the bank in the foreign currency deposit account and all foreign exchange disbursements must be made from the accounts.
Article 23 A joint venture shall set up journals to itemise cash and bank transactions in chronological order. A separate journal shall be set up for each currency if there are several currencies.
Article 24 The accounts receivable, accounts payable and other receivables and payables of a joint venture shall be recorded in separate accounts set up for different currencies. Receivables shall be collected and payables shall be paid in due time and shall be confirmed with the relevant parties periodically. The causes of uncollectible items shall be investigated and the responsibilities thereof shall be determined. Any item proved to be definitely uncollectible through strict management review shall be written off as a bad debt after approval is obtained through reporting procedures specified by the board of directors. No "reserve for bad debts" shall be accrued.
Article 25 For a joint venture using Renminbi as the bookkeeping base currency, its foreign currency deposits, foreign currency loans and other accounts denominated in foreign currency shall be recorded not only in the original foreign currency of the actual receipts and payments, but also in Renminbi converted from the foreign currency at an ascertained exchange rate (using the exchange rate quoted by the State Administration of Foreign Exchange Control).
All additions of foreign currency deposits, foreign currency loans and other accounts denominated in foreign currencies shall be recorded in Renminbi converted at their recording exchange rates, while deductions recorded in Renminbi and converted at their book exchange rates shall be recognised as "foreign exchange gains or losses" (hereinafter referred to as "exchange gains or losses").
The recording exchange rates for the conversion of foreign currency to Renminbi may be the rate prevailing on the day of recording the transaction or on the first day of the month, etc.
......