Ministry of Finance, Accounting Treatment of Engagement in Such Businesses as Receivables Financing Between Enterprises and Banks or Other Financial Institutions Tentative Provisions

Issued: May 15 2003
Effective: as of date of issue

Main contents: The Provisions stipulate that the sale of receivables of an enterprise generated from the sale of goods or provision of labour to a financial institution shall be treated as sale of receivables if relevant transactions satisfy the conditions for sales and the risks and remuneration related to the receivables have actually been transferred, otherwise it shall be treated as pledge of receivables for obtaining loans (Item One). Items Two and Three detail the accounting treatment for pledge of receivables for obtaining loans and sale of receivables. Article 3 sets out the accounting treatment of the credits receivable sold by an enterprise to a bank by an agreement with and without recourse. Article 4 sets out the accounting treatment for credits receivable rebates, which shall be dealt with by reference to the relevant provisions of the Enterprise Accounting System. Article 5 sets out that if an enterprise engages in sale or financing business on the basis of credits receivable, it shall disclose the details in its financial statements comprising the information as set out in these provisions.