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The major changes and the impact on the profit and loss of the listed companies in the new intangible asset guidelines.

Author: HanChunYan From: www.yourpaper.net Posted: 2009-12-01 05:37:06 Read:
[Abstract] from January 1, 2007 the new intangible asset criteria listed companies, this paper proposes two major changes in intangible assets and new criteria, and then analyze the impact on the profit or loss of the listed companies of the two major changes, pointing out that the new guidelines embodied the trend of China's accounting standards with international standards, there is help to improve the quality of accounting information, but some of the more obscure provisions of the new standards also need to be improved further in the future.
[Keywords] the new of intangible assets Standards profit and loss development costs amortization

A new intangible asset criteria two major changes

(A) the development costs of processing - to allow some development costs capitalized
The original guidelines require that all research and development costs expensed through profit or loss. The new standard requires a distinction between research and development phases, can be capitalized development expenditure to meet the specified conditions, recognized as intangible assets.
(B) amortization of intangible assets - to distinguish between the useful life is finite and indefinite useful life intangible assets
Different accounting the original standards require certain period for all intangible assets are carried at amortized through profit or loss. The new standard requires that distinguish life is finite and indefinite useful life intangible assets for Indefinite life intangible assets are no longer amortized, but should be at least at each financial year-end impairment testing; For useful life the amortization of intangible assets are no longer confined to the straight-line method, and the amortization period are no longer fixed.

Second, the implementation of the new intangible assets guidelines listed company profit and loss

(A) intangible assets development expenditure capitalized

1. Intangible assets development expenditures capitalized listed company profit and loss
Accounting Division of the Ministry of Finance "analysis report" on the listed companies in China in 2007 the implementation of the new accounting standards that: In 2007, there are 137 listed companies (accounting for 8.73% in 1570) capitalized development expenditure. This change does not affect the profit or loss of the listed companies is quite substantial. UFIDA annual report data, for example, I found UFIDA every year there is a lot of research and development costs charged to administrative expenses, accounting for approximately 13% to 15% of the main business income, the amount in accordance with the provisions of the new standards, These research and development expenses capitalized, will produce significant changes in the company's profits, will have a greater impact on financial indicators. UF software research and development expenses in 2005 was 1.47 billion yuan, of which the vast majority of the development costs. Assuming that 80% can be capitalized under the new standards, the carrying value of intangible assets in 2005 from 29.68 million yuan a rapid increase of 147.26 million yuan, an increase of nearly four times. The proportion of intangible assets to total assets of 9.9%. As part of the capitalized development expenditure every year thereafter, the proportion of intangible assets in total assets will be growing. In accordance with the new standards, assuming 80% of the the UF Software R & D costs were capitalized intangible assets by 10-year straight line amortization, total profit will increase by 89.69%.
2. Affect the positive significance of intangible assets development expenditures capitalized on the profits and losses of listed companies
(1) Intangible assets guidelines for the implementation of the policy of development costs capitalized to meet the recognition criteria to help enterprises technological innovation. The new guidelines allow development of an intangible asset after certain conditions are met, the costs can be capitalized without entering the profit or loss of such enterprises in the pressure on the level of profitability is suddenly slow down a lot. Costs capitalized not only reduce costs, increase profits, and increase the book value of its intangible assets, which will help the enterprises to increase investment in scientific and technological innovation, and improve their enthusiasm in the R & D investment, to mobilize the enthusiasm of the enterprise technological innovation, especially can better overcome the short-term behavior of corporate managers.
(2) the implementation of the guidelines of intangible assets capitalized development costs that meet the conditions for recognition policy, help to improve the performance of enterprises, reduce operating profit targets in the development stage pressure. Changed from full cost of the R & D costs for listed companies, conditional capitalization, to avoid a one-time write-downs of the R & D investment profit or loss can reduce the immediate loss of so many of our small and medium enterprises, and make better use of funds .
(3) Intangible assets guidelines for the implementation of the policy of capitalized development costs that meet the conditions for recognition, more in line with the requirements of the Accounting Standards authenticity. Consider new standards to the authenticity of accounting information to help users of financial reports more accurate of the enterprises in the past, now and in the future to make the evaluation and prediction.
(B) the change of the amortization of intangible assets and the impact

1. Amortization of intangible assets related to the provisions of
The new standard requires that distinguish life is finite and indefinite useful life intangible assets for Indefinite life intangible assets are no longer amortized, but should be at least at each financial year-end impairment testing; For useful life the amortization of intangible assets are no longer confined to the straight-line method, and the amortization period are no longer fixed. Chapter IV, Article XVII of the intangible assets new guidelines stipulates: amortization of intangible assets of companies have chosen method should reflect the future economic benefits generated by the enterprise is expected to consume the intangible asset can not be reliably determine consumption patterns should be used the straight-line method. Should reflect the expected economic benefits of the intangible assets related to the amortization of intangible assets of companies have chosen to explain the "Accounting Standards for Business Enterprises mentioned, implementations, including the straight-line method, double declining balance method, the sum of the number of years of law, the total production Cover method.
New standards of intangible assets for amortization of the relevant provisions of the improvement of the impact on the profit and loss
(1) distinguish the useful life of the intangible assets and indefinite useful life intangible assets are treated separately in line with the substance over form principle. Only a limited life span, amortization of intangible assets, more in line with the substance over form principle, such as trademark rights, non-patent technology Indefinite life intangible assets, as time goes on, the actual value may remain unchanged or even increase, If also amortized book value has been reduced until zero book value clearly does not reflect the true value of the intangible assets.
(2) Intangible assets amortization method change to comply with the matching principle and the precautionary principle. The new guidelines for amortization of intangible assets is not limited to the straight-line method, but rather reflect the company expected consumption of the future economic benefits of the intangible assets arising can not be reliably determined consumption patterns before using the straight-line method. Visible, the amortization method used by the new standards are more flexible. If a pre-, post, the economic benefits of intangible assets for the enterprise, the amortization of intangible assets should be used first after more than a less accelerated amortization method; bring economic benefits for the enterprise if an intangible asset pre- more late, the amortization of intangible assets should be used before less after multi accelerated amortization method; intangible asset for enterprises to bring much of the economic interests and workload, the average workload amortization method should be used . Optional for a variety of amortization methods, on the one hand reflects the international convergence of accounting standards and more comprehensive; the other hand, can also adapt to the business needs of the enterprise, to choose their own method of amortization. Conclusion

Major impact of intangible assets and new guidelines for the implementation of China's listed companies, listed companies accounting norms put forward higher requirements, and enhance the operability of the accounting standards, reduce the arbitrariness in the implementation process, from the overall on to enhance the quality of accounting information and the gold content of the performance of the company, and promote the healthy and orderly development of China's capital market and the whole of the market economy. But some of the more obscure provisions of the new standards need to be improved further in the future, need the relevant departments for the problems emerging in the process of implementation of the guidelines, in a timely manner to make specific answers or explanations to improve the supervision of the relevant departments, and constantly improve the accounting information quality; need to strengthen the training of accounting personnel expertise, improve the professional judgment of the accounting personnel; Furthermore, it should improve the assessment, evaluation and supervision system, to enhance the quality of our accounting personnel and accounting level of development, in order to guarantee the implementation of the new guidelines .
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