The management measures and procedures concerning the usage and upkeep of assets are as follows:
(a) Management of Floating Assets
-Cash and bank deposits
The cash of an enterprise should be handled by designated personnel and an income and expenditure account must be set up to record all cash transactions. Bank deposits should be credited to accounts set up under the name of the enterprise.
-Advance payments and accounts receivable
Advance payments and accounts receivable should be handled and recovered in accordance with the relevant provisions in the contract or agreement.
-Foreign currency capital
The collection, payment and custody of foreign currency capital should comply with the relevant state regulations concerning foreign exchange management. The conversion between foreign currency and the bookkeeping base currency should be dealt with in accordance with MOF regulations.
-Inventories
Inventories should be properly itemised, reasonably valued, and well maintained. There should also be a well-established system for the receipt, issuance, requisition and return of inventories as well as for physical stock taking on a regular basis.
When an enterprise issues or requisitions merchandise, semi-manufactures, raw materials and finished goods, or requisitions low-value consumables and packaging materials, the actual costs should be calculated according to stipulated accounting methods or amortised.
Where the book value and the net realisable value of the inventories differ significantly, necessitating adjustment of the book value, adjustment can be made upon approval by the competent financial authority or central administrative authority.
-Investment in kind or in intangible assets
When an enterprise invests in another enterprise in kind or in intangible assets, the assets involved have to undergo appraisal. If the investment is intended to be a short-term one, the difference between the book value and the appraised value should be treated as current profit/loss. If it is intended to be a long-term investment, it should be treated as deferred investment profit/loss which should be accounted for as non-operating income or expenses over the investment period by equal annual instalments.
(b) Fixed Assets
-Contribution in fixed assets
When fixed assets are used as capital contribution, their book value should be set at reasonable levels as stipulated in the contract or agreement, or by adding up their appraised value based on market price with other fees incurred before contribution. In the case where an investor makes contribution to the enterprise in equipment, the original invoice issued by the manufacturer should be provided in order to ascertain its value.
-Depreciation
The depreciation of fixed assets is generally calculated by using the straight-line method or production/service output method on a monthly basis starting from the second month after the fixed assets are put into use. When the fixed assets cease to be used, depreciation would stop starting from the following month. If other depreciation methods or modifications to the existing method are preferred, application for approval has to be made to the relevant authorities pursuant to the law.
-Construction projects
Before a construction project starts, the enterprise should prepare a budget, procure the necessary equipment and materials at reasonable prices, accurately estimate costs, strictly control expenses, and determine the total costs as soon as possible.
(c) Intangible Assets
Where capital contribution is made in intangible assets, it should be accompanied by documents such as copies of proof of ownership, and detailed information such as the basis and standards of evaluation. Among these, the evaluation of proprietary technologies, franchise and goodwill should be conducted by authorized certification organizations or Chinese CPAs.
