mainly include: First, the classification of financial assets has been changed from the current "four categories" to the "three categories"; second, the impairment accounting of financial assets has been changed from the "losses that have occurred" to the "expected loss law"; third, the relevant provisions on hedging accounting have been revised to make hedging accounting more truthfully reflect the risk management activities of the enterprise.
(I) Changes in financial asset classification
• Classification of old guidelines
Enterprises should divide the obtained financial assets into four categories when initially confirmed based on their own business characteristics, investment strategies and risk management requirements.
• Classification of the new standard
Enterprises should divide financial assets into three categories based on their business model of managing financial assets and the contract cash flow characteristics of financial assets.
• The business model of an enterprise managing financial assets refers to how an enterprise manages its financial assets to generate cash flow. The business model determines whether the source of cash flows of financial assets managed by the enterprise is to collect contract cash flows, sell financial assets, or both.
• The contract cash flow characteristics of financial assets refer to the cash flow attributes stipulated in the financial instrument contract and reflect the economic characteristics of relevant financial assets.
• The head of the Accounting Department of the Ministry of Finance answered a reporter's question: In the past, the classification was relatively complex and had a certain degree of subjectivity, which affected the comparability of accounting information to a certain extent. The new standards reduce financial asset classes and improve the objectivity of classification and consistency of accounting treatments.
(II) Reclassification of financial assets
• Overall processing principles for reclassification
(1) When an enterprise changes its business model to manage financial assets, it reclassifies financial assets. Changes in the business model of corporate management financial assets are an extremely rare situation. The change originates from external or internal changes and must be decided by the senior management of the company, and it must be very important to the company's operations and can be confirmed to external parties. Therefore, the business model of managing financial assets will change only when an enterprise starts or terminates an activity that has a significant impact on its operations (such as when an enterprise acquires, disposes, or terminates a business line).
(2) Enterprises reclassify financial assets and shall adopt future applicable laws to conduct relevant accounting treatments from the date of reclassification, and shall not make retroactive adjustments to previously recognized gains, losses or interest.
(3) Reclassification date refers to the first day of the first reporting period of after the business model that causes the enterprise to reclassify financial assets.
(III) Impairment of financial assets
Financial assets impairment accounting has been changed from the "Loss Act" to the "Expected Loss Act".
• Basic Principles
(1) Enterprises shall conduct impairment accounting and confirm the loss provisions on financial assets measured at amortized cost and financial assets measured at fair value and whose changes are included in other comprehensive income based on expected credit losses.
(2) The enterprise shall evaluate whether the credit risk of the relevant financial instrument has increased significantly since the initial confirmation on each balance sheet date, and measure its loss provisions and confirm expected credit losses and their changes in accordance with the following circumstances:
① If the credit risk of the financial instrument has not increased significantly since the initial confirmation, the enterprise shall measure its loss provisions according to the amount equivalent to the expected credit loss of the financial instrument in the next 12 months.
② If the credit risk of the financial instrument has increased significantly since its initial recognition, the enterprise shall measure its loss provisions according to the amount equivalent to the expected credit loss of the financial instrument during the entire duration of the financial instrument.
• Accounting processing
Debit: Asset impairment loss
Credit: Debt investment impairment provision
Other comprehensive income - credit impairment provision
Bad debt reserve
Contract asset impairment provision, etc.
