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ACCOUNTING STANDARDS FOR ENTERPRISES NO. 19 – FOREIGN CURRENCY TRANSLATION

the Ministry of Finance

Accounting Standards for Enterprises No. 19 – Foreign Currency Translation

Cai Kuai [2006] No. 3

February 15, 2006

Chapter I General Provisions

Article 1

With a view to regulating the accounting treatment for the foreign currency transactions, conversion of foreign currency financial
statements and disclosure of relevant information, the present Standards are formulated according to the Accounting Standards for
Enterprises – Basic Standards.

Article 2

The “foreign currency transaction” refers to transactions which are valuated and settled in foreign currency. The “foreign currency”
refers to a currency other than the functional currency of an enterprise. The foreign currency transactions include:

(1)

the purchase or sale of goods or services valuated in foreign currency;

(2)

foreign currency funds that are borrowed or lent; and

(3)

other transactions which are valuated or settled in foreign currency.

Article 3

The following items shall be subjected to other relevant accounting standards:

(1)

The balance of exchange arising from foreign currency borrowings for the purchase and construction or production of qualified assets
shall be subject to the Accounting Standards for Business Enterprises No. 17 – Borrowing Costs;

(2)

The hedge of foreign currency items shall be subject to the Accounting Standards for Enterprise No. 24 – Hedging; and

(3)

The translation of foreign currency in the cash flow statement shall be subject to the Accounting Standards for Business Enterprises
No. 31- Cash Flow Statement.

Chapter II Determination of Functional Currency

Article 4

The “functional currency” refers to the currency of the primary economic environment in which the enterprise is operated.

An enterprise shall, in general, choose RMB as its functional currency. For an enterprise of which the incomes and expenses are mainly
valuated in the currency other than RMB, it may choose a currency as its functional currency according to Article 5 of the present
Standards. However, the financial statements shall be translated into the ones RMB.

Article 5

When an enterprise chooses a functional currency, it shall take account of the following factors:

(1)

This currency mainly affects the selling prices of goods and services, and generally the goods and services are valuated and settled
in this currency;

(2)

This currency mainly affects the labor, materials and other costs for the goods and services, and generally the goods and services
are valuated and settled in this currency; and

(3)

The currency acquired in financing activities as well as the currency utilized to preserve the money charged in the business operation.

Article 6

When an enterprise chooses the functional currency for its overseas business, it shall taking account of the following factors as
well:

(1)

Whether or not the overseas businesses are quite independent from the activities in which it is engaged;

(2)

Whether or not the transactions with the enterprise in overseas business operations account for a relatively large proportion in oversea
business operations;

(3)

Whether or not the cash flow incurred in overseas business operations directly affect the cash flow of the enterprise, and whether
or not the cash may be remitted back at any time;

(4)

Whether or not the cash flow incurred in overseas business operations is sufficient to settle its current liabilities and predictable
liabilities.

Article 7

The “overseas business operation” refers to the enterprise’ overseas subsidiary companies, joint ventures, associated enterprises
and branches.

Where the domestic subsidiary company, joint enterprise, associated enterprise or branch of an enterprise adopts a functional currency
which is difference from that of the enterprise, it shall be deemed as overseas business.

Article 8

Once the functional currency of an enterprise is determined, it shall not be modified at will, unless the main economic environment
in which the enterprise is operated has greatly changed.

Where it is really necessary to modify the functional currency because the primary economic environment in which the enterprise is
operated has greatly changed, the enterprise shall translate all items into the post-change functional currency at the spot exchange
rate of the current date of the change.

Chapter III Accounting Treatment for Foreign Currency Transactions

Article 9

As for a foreign currency transaction, the enterprise shall translate the amount in a foreign currency into amount in its functional
currency.

Article 10

At the time of initial recognition of a foreign currency transaction, the amount in the foreign currency shall be translated into
the amount in the functional currency at the spot exchange rate of the transaction date, or at an exchange rate which is determined
through a systematic and reasonable method and is approximate to the spot exchange rate of the transaction date.

Article 11

An enterprise shall, on the balance sheet date, treat the foreign currency monetary items and foreign currency non-monetary items
in accordance with the following provisions:

(1)

The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The balance of exchange
arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial
recognition or prior to the balance sheet date shall be recorded into the profits and losses at the current period.

(2)

The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the
transaction date, of which the amount of functional currency shall not be changed.

The “monetary item” shall refer to the money held by an enterprise and the assets and liabilities to be received or paid in fixed
or determinable amounts of money.

The “non-monetary item” shall refer to the items other than the monetary ones.

Chapter IV Translation of Foreign Currency Financial Statements

Article 12

When translating the financial statements on the overseas businesses, an enterprise shall comply with the following provisions:

(1)

The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the
owner’s equity items, except the ones as “undistributed profits”, others shall be translated at the spot exchange rate at the time
when they are incurred.

(2)

The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date, or at
a spot exchange rate which is determined through a systematic and reasonable method and is approximate to the spot exchange rate
of the transaction date.

The balance arisen from the translation of foreign currency financial statements in compliance with the aforesaid Items (1) and (2)
shall be presented separately under the owner’s equity item of the balance sheets.

The translation of comparable financial statements shall be subject to the aforesaid provisions.

Article 13

An enterprise shall translate the financial statements of overseas business as situated in a hyperinflationary economy in accordance
with the following provisions:

It shall restate the balance sheet items by adopting the general price index, restate the items of the profit statement by adopting
the changes of the general price index, and then translate them at the spot exchange rate on the recent balance sheet date.

If an overseas business is no longer situated in the hyperinflationary economy, it shall stop the restatement, and shall translate
the restated financial statements at the price of the cessation date.

Article 14

When disposing an overseas business, an enterprise shall shift the balance, which is presented under the items of the owner’s equities
in the balance sheet and arises from the translation of foreign currency financial statements related to this oversea business, into
the disposal profits and losses of the current period. If the overseas business is disposed of partially, the enterprise shall calculate
the balance arising from the translation of foreign currency statements of the part of disposal based on the disposal rate and shall
shift them into the profits and losses of the current period.

Article 15

Where an enterprise does not choose RMB as its functional currency, it shall translate its financial statements into RMB financial
statements according to Article 12 of the present Standard.

Chapter V Disclosure

Article 16

An enterprise shall, in its notes, disclose the following information related to the translation of foreign currencies:

(1)

The functional currency chosen by an enterprise and its overseas businesses and the reasons for such choice; if the functional currency
is changed, the grounds for the change shall be given;

(2)

If an approximate exchange rate is adopted, the method for the determination of the approximate exchange rate shall be given;

(3)

The balance of exchange which shall be recorded into the profits and losses of the current period; and

(4)

The effects of disposal of any overseas business on the balance arising from the translation of foreign currency financial statements.



 
the Ministry of Finance
2006-02-15

 






NOTICE OF THE MINISTRY OF FINANCE AND THE STATE ADMINISTRATION OF TAXATION ON SOME ISSUES CONCERNING LAND VALUE-ADDED TAXES

Notice of the Ministry of Finance and the State Administration of Taxation on Some Issues concerning Land Value-added Taxes

Cai Shui [2006] No. 21
March 2, 2006

The public finance departments or bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly
under the Central Government and cities specifically designed in the state plan, and the finance bureau of Xinjiang Production and
Construction Corps.:

In pursuance of the spirit as embodied in the Interim Regulations of the People’s Republic of China on Land Value-added Taxes (hereinafter
referred to as the Regulations) and the detailed rules for the implementation thereof as well as relevant provisions, we hereby clarify
the relevant issues concerning land value-added taxes as follows:

I.

As for issues concerning the tax collection and exemption in the sale of residential houses of ordinary standard as built by taxpayers
as well as in the transfer of ordinary residential houses by individual residents

The “residential houses of ordinary standard” as mentioned in Article 8 of the Regulations and the “ordinary residential houses”
as mentioned in Article 3 of the Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the Tax
Policies for the Real Estate Market (Cai Shui Zi [1999] No. 210) shall be recognized all according to the standards for the “small
or medium-sized ordinary residential houses at moderate and low prices” as formulated and publicized to the general public by the
people’s governments of each province, autonomous region or municipality directly under the Central Government in accordance with
the Notice of the General Office of the State Council transmitting the Opinions on Doing a Good Job in Stabilizing the Real Estate
Price of the Ministry of Construction and Other Departments (Guo Ban Fa [2005] No. 26). Where any taxpayer builds ordinary residential
houses as well as other commercial houses, the amount of land added values shall be verified respectively.

As for ordinary standard residential houses, for which, before the day when this document is publicized, an application for tax exemption
has been filed to the tax authority at the locality of the real estate and has been given the treatment of exemption from land value-added
taxes upon examination in accordance with the standards for ordinary standard residential houses as determined by the people’s governments
of a province, autonomous region or municipality directly under the Central Government, adjustment shall be retroactively made to
the exempted land value-added taxes.

II.

As for Issues concerning the Calculation under the Item of Deduction in the Transfer of Old Houses

Where any taxpayer transfers any old house or building, if he fails to obtain the assessed price but is able to provide the house
purchase invoice, the amount under the item of deduction as provided for in items (1) and (3) of Article 6 of the Regulations may,
upon the recognition of the local tax authority, be calculated in light of an increased interest rate of 5% on an annual basis of
the amount held on it for a term spanning from the year of purchase to the year of transfer. As for the deed tax by a taxpayer when
purchasing a house, if the relevant deed tax payment certificate can be presented, it may be deducted as “tax relating to the transfer
of real estate” and shall not be included into the base corresponding to the interest rate of 5%.

As to the transfer of any old house or building, in the case of no relevant assessed price or house purchase invoice, the local tax
authority may conduct tax collection upon verification in accordance with the provisions of Article 35 of the Law of the People’s
Republic of China on Tax Collection and Administration (hereinafter referred to as the Tax Collection and Administration Law).

III.

As for issues concerning the advance collection of land value-added taxes as well as the settlement thereof

All regions shall further improve the measures on the advance collection of land value-added taxes, and decide the advance collection
rate in a scientific and reasonable manner and adjust it at a proper time in light of the value addition level of the real estate
as well as the market development condition within the respective regions and on the basis of the different house categories such
as ordinary houses, non-ordinary houses and commercial houses. After a project is completed, the relevant settlement shall be made
in a timely manner, with any overpayment refunded or any underpayment supplemented.

In case any tax fails to be paid in advance during the advance collection term, the late fees shall be collected additionally as of
the day next to the expiration of the prescribed advance collection term in accordance with the relevant provisions of the Tax Collection
and Administration Law as well as the detailed rules for its implementation.

As for any real estate project that has been finished and has gone through the check and acceptance, where the building area of the
real estate as transferred makes up 85% or more of the salable building area, the tax authority may require the relevant taxpayer
to conduct settlement of land value-added taxes on the transferred real estate in light of the matching principles regarding the
proportion between the income as generated from the transfer of real estate and the amount under the item of deduction. The specific
settlement methods shall be provided for by the local tax authority of a province, autonomous region, municipality directly under
the Central Government and city specifically designed in the state plan.

IV.

As for issues concerning the tax collection and exemption for the real estate as transferred by a taxpayer himself due to the relocation
as required for the implementation of urban planning and state construction

In Paragraph 4 of Article 11 of the Detailed Rules for Implementing the Interim Regulations of the People’s Republic of China on
Land Value-added Taxes, it prescribes that the relocation due to “the implementation of urban planning” refers to the relocation
since that the reconstruction of an old city or enterprise pollution or disturbing the residents (producing so excessive waste gases,
waste water, waste residues and noises, that the life of urban residents is affected to a certain degree) and thus the government
or the relevant administrative departments of the government decides and thereafter carries out the relocation in light of the urban
planning that has been examined and approved; the “relocation as required by state construction” refers to a situation under which
relocation is required for the purpose of implementing any construction project that has been approved by the State Council, a provincial
people’s government, or the relevant ministry or commission of the State Council.

V.

As for Issues concerning the tax collection and exemption for the investment or joint management with real estate

As for any investment or association by using land (real estate) as payment for the purchase of shares, where an enterprise involved
in the investment or joint management engages in the real estate development or where any other real estate development enterprise
makes investment or conducts joint management with the commercial houses built by itself, it shall not be subject to Article 1 of
the Notice of the Ministry of Finance and the State Administration of Taxation on the Provisions on Some Specific Issues regarding
Land Value-added Taxes (Cai Shui Zi [1995] No. 048) on the interim exemption of land value-added taxes.

VI.

The present Notice shall go into effect as of March 2, 2006.



 
Ministry of Finance, State Administration of Taxation
2006-03-02

 






CIRCULAR OF THE MINISTRY OF FINANCE ON THE RELEVANT ISSUES CONCERNING ENTERPRISE ACCOUNTING TREATMENTS AFTER THE EFFECT OF THE COMPANY LAW

Ministry of Finance

Circular of the Ministry of Finance on the Relevant Issues concerning Enterprise Accounting Treatments after the effect of the Company
Law

No. 67 [2006] of the Ministry of Finance

March 15, 2006

To the departments (bureaus) of finance of all provinces, autonomous regions, municipalities directly under the Central Government
and cities under separate state planning, and the bureau of finance of Xinjiang Production and Construction Corp., all the relevant
ministries and commissions of and the relevant institutions directly under the State Council, and all the enterprises directly under
the Central Government,

The Company Law of our country amended and adopted for the third time has come into force as of January 1, 2006, and we hereby circulate
a notice on the enterprise accounting treatments as follows:

I.

On the Appraisal of Capital Contributions in the form of In-kind Capital

According to Article 27 of the Company Law, where an enterprise establishes a company by the capital contributions of substance,
intellectual property right, land use right or other non monetary assets, the aforesaid capital contributions shall be subject to
appraisal and pricing to verify the assets. Where a state-owned or state holding enterprise makes capital contributions in non monetary
assets or accepts the capital contributions in non monetary assets from other enterprises, it shall entrust a qualified asset appraisal
institution for asset appraisal in accordance with the relevant state provisions on asset appraisal; and the appraisal of capital
contributions in other non monetary assets shall be conducted by referring to the aforesaid provisions.

II.

On the Disposal of the Balance of Public Welfare Funds

An enterprise established according to the Company Law shall not draw public welfare funds when it distributes profits according to
Article 167 of the Company Law after January 1, 2006. At the same time, the State-owned enterprises and other enterprises shall
abolish the system of public welfare funds simultaneously in order to keep the coherence between the accounting policies of the enterprises.
With respect to the balance of public welfare funds before December 31, 2005, the enterprise shall put it under the management and
use of the surplus reserves; the deficit of public welfare funds shall be made up by the surplus reserves, capital reserves and the
undistributed profits of the previous year in sequence, and it shall be carried forward to the account of undistributed profits and
be made up by the after-tax profits realized in the later years where there still remains deficits.

Where an enterprise carries out the reform of housing system upon approval, it shall abide by the Notice on the Relevant Accounting
Treatments in the Reform of Enterprise Housing System (Cai Qi [2000] No.295) and the Supplementary Notice on the Relevant Accounting
Treatments in the Reform of Enterprise Housing System (Cai Qi [2000] No. 878) in the process of implementation. An enterprise shall
not purchase or build houses for its employees any more and shall not arrange the relevant expenses in surplus reserves after carrying
out the housing monetization reform according to the uniform State provisions.

With respect to the expenses for purchasing fixed assets necessary for the staff canteen, infirmary, nursery and other welfare institutions
originally operated by the public welfare funds, an enterprise that has not peeled the social functions from itself or has not implemented
the segmentation between main and supplementary businesses and restructuring of the latter shall be subject to examination and approval
in strict accordance with the procedures and privilege prescribed in the internal accounting system of the enterprise, and shall
implement the relevant management system regarding the production and operational assets of the enterprise.

After an enterprise abolishes the system of public welfare funds, if the board of directors of a foreign-funded enterprise decides
to continuously draw the staff bonus and welfare fund, it shall be subject to the liability management, with the purposes, conditions
and procedures for the use thereof being specified.

III.

On the Issue of Accounting Treatments After a Joint-stock Limited Company Purchase its Own Stocks

Where a joint-stock limited company repurchases its own stocks in light of Article 143 of the Company Law, it shall carry out the
accounting treatments according to the following requirements:

i.

The stocks repurchased by a company shall be subject to the management of treasury stocks before cancellation or transfer, and all
the expenses in the stock repurchase shall be transferred into the cost of treasury stocks. However, in case of the stock repurchase
resulted from the merger with any other company that holds its stocks, the cost of treasury bonds shall be determined on the basis
of the book value of the relevant investments of its stocks held by the other company provided that both participants of the merger
are ultimately controlled by a same shareholder both before and after the merger; and if they are not ultimately controlled by a
same shareholder, the cost of treasury stocks shall be determined on the basis of the fair value of the relevant investments of its
stocks held by the other company.

When the treasury stocks are cancelled, the capital stocks shall be correspondingly reduced on the basis of the amount of the stocks
that are cancelled, and the surplus of the cost of treasury stocks over the corresponding capital stocks shall be used to write off
the capital reserves, surplus reserves and the undistributed profits of the previous year in sequence; and the capital reserves shall
be increased for the deficit of the cost of treasury stocks over the corresponding capital stocks.

When the treasury stocks are transferred, the surplus of incomes incurred from the transfer over the cost of treasury stocks shall
be used to increase the capital reserves; and the deficit over the cost of treasury stocks shall be used to write off the capital
reserves, surplus reserves and the undistributed profits of the previous year in sequence.

ii.

With respect to the stocks repurchased due to the implementation of employee equity incentive plans, the stocks to be repurchased
shall not be more than 5% of the total amount of the stocks the company issues, and the required capital shall be within the amount
of profits that can be distributed to the investors in the current term.

Where the date when the general assembly of shareholders adopts the employee equity incentive plans and the date of stock repurchase
do not fall in the same year, the company shall preserve the expense for the planned repurchase in the profits that can be distributed
to the investors in the current term, and the preserved profits shall not be distributed any more when the employee equity incentive
plans are adopted.

When the company repurchases the stocks, it shall transfer all the expenses for stock repurchase into the cost of treasury stocks,
and simultaneously transfer the profits to be distributed to investors into the capital reserves in light of the amount of expenses
for the repurchase.

iii.

The treasury stocks shall not be used in the profit distribution of the company, and a joint-stock limited company shall reflect it
as the deduction item of ownership rights and interests.

IV.

This Notice shall come into force as of April 1, 2006. In case of any problem encountered in the implementation thereof, please timely
report it to this Ministry.



 
Ministry of Finance
2006-03-15

 






ANNOUNCEMENT NO.44, 2006 OF THE GENERAL ADMINISTRATION OF QUALITY SUPERVISION, INSPECTION AND QUARANTINE OF THE PEOPLE’S REPUBLIC OF CHINA, ON ADJUSTING THE EXAMINING AND APPROVING OF THE LABEL SYSTEM ON IMPORT AND EXPORT FOODSTUFF AND COSMETICS

General Administration of Quality Supervision, Inspection and Quarantine

Announcement No.44, 2006 of the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic
of China, on Adjusting the Examining and Approving of the Label System on Import and Export Foodstuff and Cosmetics

[2006] No. 44

March 24, 2006

Announcement on Adjusting the Examining and Approving of the Label System on Import and Export Foodstuff and Cosmetics In order to
act in the spirit of the State Council of reforming administrative examination and approval, simplify procedures, make things convenient
for import and export, after studying, it is decided to adjust the examining and approving of label system on import and export foodstuff
and cosmetics and it is hereby announced:

1.

The label for import foodstuff and cosmetics must accord with the provisions of Chinese laws￿￿ regulations and coercive standards
(corresponding laws￿￿ regulations and standards may be downloaded from www.aqsiq.gov.cn /safety of import & export foodstuff and
cosmetics /label management of foodstuff and cosmetics). The label of export foodstuff and cosmetics must meet the requirements of
the import country /region.

2.

As of April 1, 2006, the label of import and export foodstuff and cosmetics will be examined and approved together with the inspection
and quarantine of import and export foodstuff and cosmetics and will not be applied for pre-examination and approval. The authorities
concerned at all levels will not accept and handle the application for pre-examination and approval of the label of import and export
foodstuff and cosmetics. The exit and entry inspection and quarantine authority shall not ask for the application for coercive inspection
by Label Examination and Approval Certificate of Import and Export Foodstuff and Cosmetics.

3.

Local exit and entry inspection and quarantine authorities shall, while carrying out inspection and quarantine of import and export
foodstuff and cosmetics, examine whether the content of the label meet the requirements of laws, regulations and standards and examine
the truthfulness and accuracy of the content relating to quality. To the label passing the examination, “Label Passing the Examination”
shall be indicated in the inspection certificate provided according to rules.

The label of import foodstuff and cosmetics that does not accord with the provisions of national laws, regulations and coercive standards
before October 1, 2006 may be altered under the supervision of exit and entry inspection and quarantine authority and shall be granted
clearance according to rules.

As of October 1, 2006, any label of import foodstuff and cosmetics that does not accord with the provisions of relative laws, regulations
and standards of our country shall be handled according to the provision of Article 19 of Implementation Regulations of Inspection
Law for Import and Export Goods of the People’s Republic of China, and any label of export foodstuff and cosmetics that does not
accord with the regulations of import country/ region shall be handled according to the provision of Article 27 of Implementation
Regulations of Inspection Law for Import and Export Goods of the People’s Republic of China.

4.

The Label Approval Certificate for Import (Export) Foodstuff and Cosmetics that has already been obtained is still valid. The label
of import and export foodstuff may be exempted from label examination if the content of it accords with the content indicated in
the approval certificate.

If it needs to change a new certificate because of the changes of new requirements in General Standard for Label of Prepackaged Food
of the People’s Republic of China (GB7718-2004), General Standard for Label of Prepackaged Special Foods of the People’s Republic
of China (GB13432-2004) and other new standards, the certificate shall be changed in accordance with the provisions of the Announcement
of Examining and Changing the Label Approval Certificate for Import Foodstuff. The closing date for changing the certificate is May
1, 2006. Hereafter, any certificate that does not accord with new requirements due to the changes of the requirements of laws, regulations
or standards shall become invalid automatically.

5.

The inspection and quarantine authorities shall, while inspecting and quarantining import and export foodstuff and cosmetics, including
label examination and approving, testing and checking, collect the charges uniformly according to the standard for inspection and
quarantine charges, shall not collect any charges for label examination.

General Administration of Quality Supervision, Inspection and Quarantine

March 24, 2006



 
General Administration of Quality Supervision, Inspection and Quarantine
2006-03-24

 






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CONSTITUTION ACT, 1982 – page 22

NOTES (1) The enacting clause was repealed by the Statute Law Revision Act, 1893, 56-57 Vict., c. 14 (U.K.). It read as...

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

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