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The small proposed new debt restructuring guidelines

Author: XieHua From: www.yourpaper.net Posted: 2007-11-21 13:03:15 Read:
Abstract: In December 2000, the Ministry of Finance "Accounting Standards for Business Enterprises - debt restructuring revised, new guidelines revised in the definition of the debt restructuring, the way, the creditors and the debtor's accounting treatment changes. Great new debt restructuring guidelines standardize the behavior of corporate debt restructuring, to prevent the enterprise by the reorganization of the machine operating profit, whitewash accounting statements. But is also in the process of implementation, there are some problems, such as to abandon the use of fair value measurement is appropriate, modify the debt repayment conditions judgment creditor whether or not to make concessions do not need to consider the time value of money. In this paper, the existence of these problems are discussed and recommendations. Keywords
: debt restructuring fair value is the present value of

Abstract: The Ministry of Finance revised the Accounting Standard for Business Enterprises: the debt over reorganisation in December, 2000 New standard revised has great changes on the definition and way of debt reorganisation, and accounting treatment of creditor and debtor. New debt reorganisation standard standardizes debt reorganisation action of enterprise, avoid enterprise manipulating earnings and window-dressing accounting statement while reorganising. It still has some questions during execution course, for example, whethe it is suitable or not for giving up "fair value" measurement, and whether it is necessary or not that creditor considers time value of money when judging compromise of creditor after revising debt repayment condition, and so on. This article explored these questions and put forward to some corresponding suggestions
Key words: the debt reorganisation fair of value present worth

in June 1998, the Ministry of Finance issued the "Accounting Standards for Enterprises?? debt restructuring" (hereinafter referred to as the "Old Standards"), and into effect on January 1, 1999. The guidelines to standardize our corporate debt restructuring behavior has played an important role, but there are still some problems in the implementation process, such as the debtor by the debt restructuring manipulate profits. To solve these problems, the Ministry of Finance that the guidelines were revised in January 2001 issued a revised "Accounting Standards for Enterprises?? Debt restructuring" (hereinafter referred to as the "new guidelines"). The new guidelines for the implementation of enhanced business conditions of authenticity and the authenticity and reliability of the financial statements, and also regulate the behavior of corporate debt restructuring.
1, the comparison of the old and new guidelines
definition of the debt restructuring and the way. The old criteria of the debt restructuring is defined as: "the case of financial difficulty, the debtor, the creditors in accordance with the agreement reached with the debtor or court ruled concessions matters". It emphasizes that the debtor's financial difficulties and creditors to make concessions, the new guidelines no longer emphasize these two points. New criteria for the definition of debt restructuring: "creditors agree with the debtor to modify the terms of a debt matters" in accordance with an agreement reached with the debtor or the court's ruling that, regardless of whether the debtor is in financial difficulties, or in the liquidation or reorganization of the state, and regardless of whether or not creditors make a concession, as long as the modified terms of a debt, and should be treated as debt restructuring. This expanded the scope of the debt restructuring, is consistent with the Australian Accounting Guide No. 11 on the definition of debt restructuring, is essentially a generalized debt restructuring. Expanded the scope of the definition of debt restructuring, along with restructuring change: One way split of the old criteria in assets in satisfaction of debt "became" lower than the book value of debt cash debts "and" non-cash assets to pay off debt, the value of non-cash assets for debt service is lower than can be higher than the carrying value of the debt; second is to modify other terms of a debt in this way, in addition to the old criteria "to extend the debt duration and reduce the debt principal or reduce the interest on the debt or eliminates accrued and unpaid interest, "extend debt maturity, extend debt maturity and additional interest", which is also reflected in the debt restructuring, creditors and do not have to make concessions characteristics.
2, the accounting treatment of the debtor. The old criteria, the debtor in debt restructuring, the transfer value of the assets is greater than its book value due to restructuring debt, or the difference of the amounts payable in the future are recognized as a gain on debt restructuring are included in "operating income?? Gain on debt restructuring". Loss of listed companies on the use of debt restructuring for additional restructuring gains and huge profits, so the loss is reduced or profitability, maintaining statements of profit, so that the accounting statements untrue. Therefore, the new guidelines have been modified to provide that the the debtor transfer value of the assets is greater than its book value due to restructuring debt or in the future to cope with the amount of the difference between the All included in capital surplus, no longer recognized as a gain on debt restructuring. The debtor can not obtain huge profits through debt restructuring whitewash accounting statements. As in the case of restructuring Zhengbaiwen, creditors Xindagongsi debtor Zhengbaiwen Restructuring Agreement eliminates its 1.5 billion debt. Under the old criteria, 1.5 billion can be all recognized as a gain on debt restructuring, profit will have a significant impact, mislead investors and users of financial statements. So, the Ministry of Finance explicitly Zhengbaiwen 150 million yuan can not be recognized as revenue. Provisions in accordance with the new guidelines, all included in capital surplus. As a result, Zhengbaiwen will not get any restructuring gains. In addition, the old criteria, the debtor in the debt restructuring will only produce recombinant income, not loss, so you do not have to do the accounting treatment of the debt restructuring loss. In the new guidelines, in addition to concessions by creditors on debt restructuring, debt restructuring normal circumstances, the debtor may occur debt restructuring loss occurred restructuring losses included in "operating expenses?? Debt restructuring loss.


3, the creditors accounting treatment. Creditors accounting for the major change is that the measurement of the creditors on debt restructuring losses and the value of non-cash assets repossessed. Old criteria, the creditors accept non-cash assets or equity are accounted for at fair value, the difference between the book value and fair value of the debt is recognized as a loss of debt restructuring, are included in "operating expenses?? Debt restructuring loss", however, our current production market, the equity market is still in the establishment of the perfect, and there are too many human factors, the fair value is really "fair" doubtful, which had a certain impact on the authenticity of the financial statements. So the new guidelines on the fair value of the modified. When non-cash assets or debt into capital to pay the debts, the creditors according to the book value of the restructured as transferee the recorded value of non-cash assets or equity, and thus will not the debt restructuring loss. Fair value only as a sub-metering method, only the number of non-cash assets or equity to use as a standard number of transferee creditors.
Second, the new guidelines
few major changes from the debt restructuring guidelines to see the new guidelines will make investors aware of the higher quality of accounting information, more realistic operating conditions for listed companies, The debt restructuring behavior of the listed companies will also be greatly specifications focus on the the real reorganization will replace the statements reorganization to improve the operating conditions of. But the new guidelines are still some issues worthy of us to discuss.
1, false statement of assets, the accounting statements untrue. Debt restructuring guidelines to modify the scope of the debt restructuring, expanding, no longer confined to the creditor must make concessions. But Chinese enterprises to restructure its debt, the vast majority of creditors are made concessions, that is, in the book value of non-cash assets or debt into capital to pay the debts, assets are generally lower than the value of debt . The book value of the creditors' claims are accounted for, so that the value of the assets accepted to raise a lot of that during the reorganization date to the end of the provision for asset impairment falsifying the value of assets, especially when the book value of debt is far higher the actual value of non-cash assets or equity, creditors massive false statement of assets, easily the users of financial statements to be misleading, and does not conform to the principle of prudence. Of course, the book value of the creditors' claims accounted prerequisite to the end of the period to be recognized as an impairment, but due to the lack of inventory, fixed assets, intangible assets and other non-cash assets relatively active market and the fair market price, and the value of the assets themselves. uncertainty, coupled with the enterprise for its own reasons, do not want to provide real accounting information, unwilling or no provision for asset impairment. Even if short-term investments are generally active in the capital market, the end of the period can also be reached no mention of the purpose of the diminution in value by choosing a provision for diminution in value of assets has been in a state falsifying statements untrue. Ending creditors provision for impairment of assets, in fact the predominantly debt restructuring loss, rather than asset impairment losses. Transferred to the debt restructuring loss in asset impairment losses and distortion of the financial position of the enterprise, easy to make investors and users of financial statements of the financial position of the enterprise to create misunderstanding.
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