**From the Internet).
Changes in the disclosure of accounts and notes under the old and new standards
**From the Internet).
New revenue standard ledger account statement items
Accounts receivable and contract assets are separated
Practical FAQs:(1) Whether or not an invoice is issued is not a sufficient factor to distinguish between the two;(2) Contract liabilities do not include VAT;However, in accordance with the guidelines of the Accounting Department of the Ministry of Finance, the implementation of the Q&A includes VAT;(3) In practice, the quality margin receivable is usually included in the contract assets.
In addition, the CSRC's annual regulatory report on listed companies has also pointed out that some listed companies directly reclassified the book value of completed unsettled payments and advance receivables originally included in inventory into contract assets and contract liabilities respectively when adjusting their balance sheets on the first execution date in accordance with the new revenue standards, but did not reclassify the estimated contract losses arising from loss-making contracts originally included in the provision for inventory decline as projected liabilities, nor did they deduct the value-added tax included in the original advance receivables.
Distinction between contractual liabilities and financial liabilities
According to the relevant provisions of the Income Standard and the Financial Instruments Standard, the obligation of an enterprise to transfer goods to the customer for the consideration received or receivable from the customer constitutes a contractual liability;
The inevitable contractual obligation of an enterprise to deliver cash or other financial assets to other parties constitutes a financial liability.
A business awards reward points to customers who purchase their goods, and customers can choose to redeem those points for goods sold by the business or other parties.
When the customer chooses to exchange the goods sold by the other party, the enterprise bears the obligation to pay the price of the relevant goods to the other party. Reward Points granted to customers by a business provide them with an additional purchase option and constitute a material right, as a separate performance obligation.
Businesses are required to split the price charged for the sale of the goods between the sale and the reward points in relative proportion to the individual selling price. When a customer chooses to redeem reward points for goods sold by other parties, although the enterprise bears the obligation to deliver cash to the other party, since this obligation arises from the customer's purchase of goods and the acquisition of reward points, the revenue standard is applied for accounting.
The part of the contract price received by the enterprise that is allocated to the reward points (regardless of whether the customer chooses to redeem the goods of the enterprise or other parties in the future) shall be recognized as a contract liability firstWhen the customer chooses to redeem the goods sold by the other party, the company's obligation to redeem points is discharged, and the company shall reclassify the amount it is obligated to pay to the other party from the contractual liability to the financial liability.
Accounting differences between the old and new standards for engineering construction enterprises
Note: Under the new revenue standard, contract performance costs do not include contract gross profit, only performance costs.
Differences in revenue recognition between the new revenue standard and the tax code
**From the Internet).
The new revenue standard regulates the original income accounting behavior and further narrows the differences between the accounting standards and the tax law, but there are still the following differences:
One is the difference in revenue recognition conditions. Under the new revenue standard, the "five-step method" is adopted for accounting recognition of income, and the tax income can be recognized if the main interests and remuneration of the goods or services of the enterprise have been handed over to Party A, the enterprise has not continued to control the goods, and the amount of income has formed an objective fact.
The second is the difference in the recognition of installment collection. The tax law stipulates that for installment collection, only the corresponding amount of income will be recognized according to the time point specified in the contract. Under the new revenue standard, the difference in the price of instalment collection is amortized over the payment cycle using the effective interest method.
[Case].
An elevator manufacturing company sells escalators to shopping malls and provides two sales plans, one is to pay the full price of 4 million yuan (tax included) when the product is delivered, and the other is to pay 4.8 million yuan (tax included) by financial installment payment.
Because the early investment of the shopping mall is large and the liquidity is relatively scarce, it chooses to purchase escalators in installments and pays the price of 4.8 million yuan to the elevator manufacturer in 2 years and 24 installments according to the agreed time point.
[Analysis].
When recognizing revenue, elevator manufacturers recognize revenue in accordance with the provisions of the tax law, similar to the method of cash basis, regard the business as multiple sales business, recognize revenue of 200,000 yuan (tax included) on a monthly basis and carry forward the relevant costs in installments.
Under the new revenue standard, companies should recognize revenue based on transactions when the customer obtains control of the goods, i.e., when the goods are delivered.
At the same time, the cost is carried forward, that is, it is accounted for according to the sales business. The difference between the total amount of future payment to be recovered in installments and the transaction** (unrealized financing income of 800,000 yuan) shall be offset by financial expenses according to the principle of amortization at the effective interest rate.
It can be seen from this that the tax law revenue recognition does not take into account the financing nature of the installment collection sales business, even if the installment collection sales business does not have a financing natureThere is also a difference between the recognition of income in accounting and the recognition of income in tax law.
In addition, there is also the difference between the income from the transfer of the right to use assets and the difference in taxes arising from the receipt of donations by the company.
The impact of the new revenue standard on the financial management of enterprises
**From the Internet).
Impact on accounting
On the one hand, in the context of the new revenue guidelines,Accounts have been addedFor example, "contract assets", "contract liabilities", "contract acquisition costs" and "contract performance costs" have been newly added.
MoreoverThe contents of accounting for accounting are clarified, clarifying the differences between "contract assets" and "accounts receivable", as well as between "contract liabilities" and "accounts receivable". The new revenue standard has made the accounting content of accounting more substantial and improved the completeness of accounting information.
On the other hand, for revenue accounting,Enterprises need to choose the appropriate revenue recognition method based on judging the nature of the performance obligation.
For example, for the performance obligations to be fulfilled within a certain period of time, the enterprise can adopt the percentage of completion method to determine the completion progress, but the enterprise project may have an increase in costs, changes or business termination, which requires a re-estimation of the estimated total cost, which greatly increases the difficulty of determining the transaction.
Impact on financial statements
On the one hand, for the balance sheet, due to the addition of new ledger accountsThis makes some of the items on the balance sheet liabilities more detailedFor example, the difference between contract assets and accounts receivable, as well as the difference between contract liabilities and advance accounts receivable are clarified.
On the other hand, as far as the income statement is concerned,Changes in the method of determining income will inevitably have an impact on the amount of income. Changes in the amount of income will affect the operating income and costs in the income statement, for example, the use of sales rebate policy to adjust the operating income of the income statement will be limited.
At the same time, the new revenue standard also imposes requirements for the disclosure of information in the notes to the financial statements, requiring more detailed information than the disclosure under the old standard.
Impact on finance staff
The new revenue standard readjusts the revenue recognition model and clarifies the "five-step method" recognition processThisFinancial personnel are required to have a high level of professional judgment and calculation skills.
On the one hand, in the contract identification stage, for contracts that do not meet the five conditions, the financial personnel can only recognize the consideration that has been collected as income when they are sure that they no longer have the residual obligation to transfer the goods to the customer, otherwise they should be recognized as liabilities, which requires the financial personnel to have strong subjective judgment ability.
On the other hand, in the stage of determining the transaction**, for the case of variable consideration, the manager needs to determine the best estimate of the variable consideration, and it is necessary to clearly include the limit on the amount of variable consideration for the transaction**. This requires finance personnel to not only understand the business operation model, but also have strong accounting skills.
Impact on tax planning
On the one hand, the new revenue standard improves the applicability of accounting policies to enterprises in different regions, requiring enterprises to comply with the requirements of the new revenue standard when planning for tax purposes.
On the other hand, the premise for the determination of income is the legality and reasonableness of the enterprise's transactions, and the tax law also restricts the adjustment of the enterprise's operating income, unifying the time for determining the income in the tax management of the enterprise.
About the Author
Authors: Pan Zijun, Master of International Accounting and Financial Management, University of Glasgow, UK, Master of Industrial Economics, Jinan University
More than 10 years of experience in financial and tax consulting, corporate management, secretary of the board of directors of A-share IPO, financial management, industrial research, etc
He is good at analyzing and solving related problems from the perspectives of enterprise management, financial management, tax planning, corporate IPO standardization, equity design, and industrial economy.