On the exchange of nonmonetary assets compared the old and new accounting standards 10777.doc

On the exchange of non-monetary assets compared the old and new accounting standards Abstract Ministry of Finance on February 5, 2006 officially launched the exchange of non-monetary assets of 38 new accounting standards required January 1, 2007 at the listed companies. This article aims to 'Accounting Standards for Enterprises - Non-Monetary Transactions' and the 'Accounting Standards for Enterprises - the exchange of non-monetary assets' on the exchange of non-monetary assets to make a comparative analysis of the differences in order to deeply understand the new guidelines.                 Key words non-monetary transactions at fair value premium to book value of                            With the rapid development of China's securities market and business the way business is constantly changing, non-monetary transactions more and more, in order to adapt to the development of securities markets and business the way business is constantly changing, the Ministry of Finance since 1999 to formulate and release the ' Accounting Standards for Enterprises - Non-Monetary Transactions', and in 2001 was revised. February 25, 2006, the Ministry of Finance to regulate corporate accounting recognition, measurement and reporting of behavior to ensure the quality of accounting information, once again revised and published 'Accounting Standards for Enterprises - Basic guidelines' and 38 specific guidelines, including:' Company Accounting Standard No. 7 - non-monetary assets exchanged '. This article aims to 'Accounting Standards for Enterprises - Non-Monetary Transactions' and 'Accounting Standards for Enterprises - the exchange of non-monetary assets' on non-monetary assets to make a difference in the exchange of comparative analysis.                 Non-monetary asset swap transaction refers to the two sides mainly to inventory, fixed assets, intangible assets and long-term equity investments and other non-monetary exchange of assets. This exchange does not involve, or involves only a small amount of monetary assets (ie the premium). Non-monetary transactions sometimes may involve a small amount of monetary assets. Non-monetary transactions does not mean that does not involve any assets. If only involves a small amount of monetary assets, still belong to the non-monetary assets exchanged. If the payment of monetary assets accounted for the proportion of the fair value of assets (or accounting for a fair value of assets and payment of monetary assets and the ratio) is below 25% (including 25%), are considered non-monetary transactions ; if this proportion is higher than 25% (excluding 25%), are regarded as monetary transactions.                 Using non-monetary assets will be reflected in the behavior of the exchange of reciprocal transfers. Enterprises in the production and operation carried out in the process of the types of transactions, in accordance with the nature of transactions can be divided into reciprocal and non-reciprocal transfer of the transfer. Reciprocal transfer, is an enterprise and another exchange between enterprises, the result is the enterprise in exchange for these assets in exchange for the cost of the assets. Non-reciprocal transfer refers to the one-way transfer of assets from a business transferred to its owner or other enterprise, or by the owner or other business transfer to the enterprise. Mentioned here refers only to non-monetary transactions to exchange non-monetary assets, which is mutually beneficial transfer. Rather than the reciprocal transfer of the transaction does not have commercial substance, it is not included in the non-monetary transactions.                 I. Comparison of old and new accounting standards                 (A) change the value of assets accounted for differences in measurement: old criteria to be swapped out for the asset's carrying value as the recorded value of assets. The new guidelines provide non-monetary transactions meet: The transaction has commercial substance and change into or out of the assets for at least one of these two can be reliably measured the fair value of these two conditions, at fair value as the recorded value of assets and exchange. Does not meet two conditions, in order to swap out the asset's carrying value as recorded for the value of assets transferred. Commercial substance of the judgments are as follows:                 1. The exchange has commercial substance. The so-called commercial real is one of the following conditions are met non-monetary exchange: a, for the future cash flows of assets and risk, time, amount of the assets swapped out with significantly different; b, exchange of assets and the assets swapped out estimated future cash flows and its difference with the exchange of different assets and swapped out into the fair value of assets compared to significant.                 In determining whether the non-monetary exchange has commercial substance of the assets, the enterprise should also be concerned about the transaction between the parties to the existence of related party relationships. Because of the existence of related party relationships and lead to the exchange of non-monetary assets do not have commercial substance. This provision of the enterprises to use the fair value of related-party transactions and profit situation of manipulation can play the role of certain limitations.                 Therefore, only those caused by changes in corporate cash flows and the exchange parties are not related parties to exchange non-monetary assets only have commercial substance.         2. Exchange of assets or exchange out of the fair value of the assets can be reliably measured. Exchange into the assets and the fair value of assets are swapped out can be reliably measured, it should be in exchange for the assets at fair value as determined for the cost basis of assets and there is conclusive evidence that the fair value of assets for more reliable, except.                 Thus, only the old criteria were the use of fair value of the premium Fang Cai, and new guidelines on the use of fair value and further increase the limit on condition that the old criteria based on the inheritance and development.                 (B) the right to buy in the old and new criteria for comparison of the value of the assets recorded                 1, the premium is not involved under the conditions: the old criteria in exchange for a book value of assets denominated in: = exchange value of assets recorded for a book value of assets to be paid the relevant taxes +. If the new guidelines for the fair value of the assets denominated in: change the recorded value of assets = swapped out the fair value of the assets to be paid the relevant tax +; new guidelines if swapped out the asset's carrying value measurement: change in the assets of the recorded value = swapped out the asset's carrying value of + should be paid the relevant taxes. The old norms and new criteria to the same result as the book value pricing.                 2, in relation to the premium under the conditions: (a) pay the premium: the old criteria, in order to swap out the asset's carrying value measurement: the recorded value of assets and exchange = swapped out the asset's carrying value of + + to be paid the premium related to taxes and fees. The new guidelines for the assets in accordance with the fair value measurement: change the recorded value of assets = swapped out the fair value of assets + + premium to be paid the relevant taxes and fees; new guidelines for the assets in accordance with the book value of measure: change in the assets of the recorded value = swapped out the asset's carrying value of + + the premium to be paid the relevant taxes and fees. The old norms and new criteria to the same result as the book value pricing. (2) The receipt of the premium: the old criteria, in exchange for the assets book value measurement: the recorded value of assets and exchange = swapped out the book value of assets - (premium - to be recognized in earnings) + to be paid the relevant taxes and charges , of which: profit and loss should be recognized = premium - (a premium for a fair value of assets ÷ ) * for a book value of assets - (÷ a premium for a fair value of assets) * to be paid the relevant taxes and fees. The new guidelines for the assets in accordance with the fair value measurement: change the recorded value of assets = swapped out the fair value of assets - the premium to be paid the relevant tax +; new guidelines for the assets in accordance with the book value of measure: change in the assets of the recorded value = swapped out the book value of assets - the premium to be paid the relevant taxes +.                 3, at the same time to buy in the case of several assets: the premium regardless of whether they are related, the basic principle is based on exchange of assets into the fair value and to buy in the proportion of the total fair value of assets on the exchange out of the asset's carrying value (book value measurement mode) or fair value (fair value measurement mode) the total amount of the premium to be paid the relevant taxes and the allocation in order to determine the exchange into the recorded value of the assets. The old and new criteria for right to buy in a number of non-monetary assets recorded value of the principle of distribution basically the same.                 From the above analysis we can see that in the new guidelines for fair value measurement model, regardless of for how much the book value of the assets as long as the change out for the fair value of assets remains unchanged, the fair value measurement for accounting for the value of assets remain unchanged, which can better reflect the real value of assets change. Under the old criteria and the book value method under the new guidelines, due to adopt a depreciation policy or provision for impairment of preparing for a different make changes in the book value of assets, the exchange confirmed the value of assets and recorded along with changes in the actual situation is clearly they do not coincide.                 (C) The difference between trading gains and losses recognized                 The old criteria in exchange for a book value of assets denominated in, and does not involve a premium for non-monetary transactions are not recognized gains and losses. Premium involved in non-monetary transactions, the receiving party should recognize the profit and loss premium, and the profit and loss contained only the premium received in the profit and loss limit.                 Whether the new guidelines is based on book value or fair value measurement for assets and recorded values, not to account for receipt of the premium contained in the gain or loss recognized, but a recognition that for a fair value of assets and its book value of the difference between the directly counted profit and loss.                 As can be seen, in order to swap out the asset's carrying value as exchange value of the assets of the recorded cases, the old and new guidelines to change as long as the book value of the transaction gains and losses resulting change. Enterprises to adopt policies and provision for depreciation of the impairment is different for a book value of assets is different, the impact of current profit and loss are also different. The introduction of new guidelines for measuring fair value, if for a book value of assets and exchange into the gap between the fair value of assets, then the impact of current profit and loss big pairs of current asset structure, income tax expenses, net income and net assets are will have great impact. Reposted elsewhere in the paper for free download http:/                 (D) Non-monetary transactions to disclose the difference in                 Old and new accounting standards in terms of disclosure is not essentially different, are required to disclose: Non-monetary assets to buy in exchange, swap out the type of assets; non-monetary assets to buy in exchange, for the amount of the assets, including those for income, swapped out the fair value of the assets, as well as for out of the asset's carrying value of the premium should be recognized gains and losses. The new guidelines also require disclosure of exchange into the cost of the asset is determined, because the old criteria is based on the book value pricing, while the new guidelines in line with conditions in accordance with fair value pricing, does not meet the conditions according to the book value pricing.                 In addition, non-monetary transaction gains and losses recognized the way there are some changes worth noting in the actual operation of the accounting practice, we need special attention. For non-monetary asset exchange, accounting and tax treatment there is significant difference. In accordance with the relevant provisions of tax laws to non-monetary assets in exchange for other non-monetary assets, is actually a transfer of assets paid acts not only in exchange for money, but the goods or other economic interests, should be non-monetary assets the exchange of decomposition for the sale or transfer of holdings of non-monetary assets and purchase of new non-monetary assets, the tax treatment of two economic operations, respectively, the corresponding calculation of pay turnover tax and income tax. That is, if the exchange has commercial substance, both dealing with the same, are to be paid the fair value and as an exchange of assets related to tax costs, fair value and swapped out the difference between the book value of assets or income recognized as current period gains and losses ; if the exchange is not at the same time consistent with commercial substance, change or exchange of assets and the fair value of these assets can be reliably measured conditions, the accounting gain or loss is not recognized in order to swap out the asset's carrying value and the related tax to be paid as an exchange of assets the cost of the tax still be swapped out in accordance with the fair value of assets, the difference between the book value of the property to confirm the transfer of income or loss, and in exchange for the fair value of assets to confirm their entry value.                 Second, the limitations of the old and new criteria and incomplete:                 Compared with the old criteria, the new guidelines are mainly around the fair value has been improved, mainly include the use of fair value measurement attribute exchange recorded to confirm the value of commercial real judgments. These improvements have a progressive nature and objective application of the theory, in line with China's current economic market objective environment. However, China's relevant laws and policies and monitoring mechanisms are not fully established, so it does not mean that our country in the non-monetary transaction has been improve