Yifan Pharmaceutical Co.Ltd(002019)
Yifan Pharmaceutical Co., Ltd. asset impairment provision calculation and write off management system
(revised in April 2002)
catalogue
Chapter I General Provisions Chapter II General principles of asset impairment recognition Chapter III withdrawal method of main asset impairment provision items Chapter IV procedures for withdrawal of asset impairment provision Chapter V procedures for write off of asset impairment Chapter VI approval authority for asset impairment and write off Chapter VII disclosure of asset impairment and write off 11 Chapter VIII Supplementary Provisions twelve
Chapter I General Provisions
Article 1 in order to standardize the accounting and financial management of the company's assets, safeguard the legitimate rights and interests of the company's shareholders and creditors, accurately measure the value of the company's assets, ensure the objectivity and authenticity of the financial situation, ensure that the company's financial statements truly and accurately reflect the company's financial situation and operating results, and effectively prevent and resolve the risk of asset loss of the company, according to the accounting standards for business enterprises This system is formulated in accordance with relevant standards and regulations such as the Listing Rules of Shenzhen Stock Exchange. Article 2 this system is applicable to the provision for asset impairment, asset loss recognition and write off management of the company and its wholly-owned and holding subsidiaries. Article 3 asset impairment refers to that the net value of future cash flow, net realizable value or recoverable amount of an asset (or asset group, the same below) is lower than its book value, including provision for credit impairment loss and provision for asset impairment loss. Article 4 the company shall inspect and test all assets on each balance sheet date to determine whether there are signs of possible impairment. If there is objective evidence indicating that an asset is impaired, the impairment provision shall be withdrawn according to the subsequent methods. Article 5 the assets referred to in this system include financial assets, inventories, prepayments, contract assets and long-term assets. (I) financial assets refer to cash held by enterprises, equity instruments of other parties and assets that meet one of the following conditions: (1) contractual rights to receive cash or other financial assets from other parties. (2) The contractual right to exchange financial assets or financial liabilities with other parties under potentially favorable conditions. (3) Non derivative instrument contracts that must be settled or can be settled by the enterprise's own equity instruments in the future, and the enterprise will receive a variable number of its own equity instruments according to the contract. (4) The derivative instrument contract that must be settled or can be settled with the enterprise's own equity instruments in the future, except the derivative instrument contract that exchanges a fixed amount of its own equity instruments for a fixed amount of cash or other financial assets. Among them, the enterprise's own equity instruments do not include the resale instruments that should be classified as equity instruments in accordance with the accounting standards for Business Enterprises No. 37 - presentation of financial instruments, or the financial instruments that the issuer is only obliged to deliver its net assets to the other party in proportion at the time of liquidation, nor do they include the contracts that require the enterprise's own equity instruments to be received or delivered in the future. (II) inventory refers to finished products or commodities held for sale in daily activities, products in progress in the production process, materials and materials consumed in the production process or the provision of labor services, including raw materials, products in process, finished products, revolving materials, etc.
(III) prepayment refers to a creditor's right incurred when the buyer and the seller agree to pay part of the payment in advance to the supplier. Prepayment generally includes prepayment of goods, prepayment of purchase deposit, etc. (IV) contract assets refer to the right of the enterprise to receive consideration after transferring goods to customers, and the right depends on other factors other than the passage of time. If an enterprise sells two clearly distinguishable commodities to customers, and the enterprise has the right to receive payment due to the delivery of one of the commodities, but the collection of the payment also depends on the delivery of another commodity, the enterprise shall regard the right to receive payment as a contract asset. (V) long term assets include long-term equity investment, investment real estate, fixed assets, construction in progress, intangible assets, goodwill and other long-term assets. Article 6 in accordance with the accounting standards for business enterprises and the accounting policies of the company, the financial assets measured at fair value, or the changes in fair value are included in the current profits and losses, are not within the scope of this system.
Chapter II General principles of asset impairment recognition
Article 7 where there are the following signs indicating that the assets may have been impaired, an impairment test shall be conducted: (I) the market price of the assets has decreased significantly, and the decline is significantly higher than the expected decline due to the passage of time or normal use. (II) the economic, technical or legal environment in which the company operates and the market in which the assets are located will undergo significant changes in the current period or in the near future, which will have an adverse impact on the company. (III) the market interest rate or other market investment return rate has increased in the current period, which affects the discount rate of the company for calculating the present value of the expected future cash flow of the assets, resulting in a significant decrease in the recoverable amount of the assets. (IV) there is evidence that the assets have become obsolete or their entities have been damaged. (V) the asset has been or will be idle, terminated or planned to be disposed in advance. (VI) the evidence in the company's internal report indicates that the economic performance of assets has been or will be lower than expected. (VII) the debtor of financial assets violates the terms of the contract, such as default or overdue payment of interest or principal, etc. (VIII) the debtor of financial assets has serious financial difficulties. (IX) financial assets cannot continue trading in the active market or it is difficult to recover the investment cost for other reasons.
Chapter III withdrawal method of main asset impairment provision items
Article 8 according to the actual situation of the company, this system regulates the extraction method of the asset items that are most likely to be impaired in the business process of the company. If the items that are not standardized are impaired, they can be handled according to the procedures stipulated in this system and with reference to the provisions of the accounting standards for business enterprises and other relevant regulations. Article 9 the withdrawal method of the provision for impairment of financial assets the company shall conduct accounting treatment for the impairment of financial instruments on the basis of expected credit loss and recognize the provision for loss. Expected credit loss refers to the weighted average value of credit loss of financial instruments weighted by the risk of default. Credit loss refers to the difference between all contract cash flows receivable according to the contract discounted at the original effective interest rate and all cash flows expected to be received, that is, the present value of all cash shortages. The factors reflected in the method of measuring the expected credit loss of financial instruments include: the unbiased probability weighted average amount determined by evaluating a series of possible results; Time value of money; Reasonable and reliable information about past events, current situation and prediction of future economic conditions that can be obtained without unnecessary additional costs or efforts on the balance sheet date. The company determines the expected credit loss of relevant financial instruments according to the following methods: (I) for financial assets, the credit loss is the present value of the difference between the contract cash flow to be received by the company and the expected cash flow to be received; (II) for lease receivables, the credit loss is the present value of the difference between the contract cash flow to be received by the company and the expected cash flow to be received; (III) for the loan commitment not withdrawn, the credit loss is the present value of the difference between the contract cash flow to be received by the company and the expected cash flow to be received when the loan commitment holder withdraws the corresponding loan.
The company's estimate of the expected credit loss of the loan commitment is consistent with its expectation of the utilization of the loan commitment; (IV) for the financial guarantee contract, the credit loss is the present value of the difference between the expected payment made by the company to the contract holder for the credit loss incurred by the contract holder and the amount expected to be collected by the company from the contract holder, the debtor or any other party; (V) for financial assets with credit impairment on the balance sheet date but not purchased or originated, the credit loss is the difference between the book balance of the financial assets and the present value of the estimated future cash flow discounted at the original effective interest rate. (VI) for financial instruments purchased or originated without credit impairment, on each balance sheet date, considering reasonable and reliable information (including forward-looking information), evaluate whether their credit risk has increased significantly since initial recognition, and recognize the expected credit loss according to three stages. If the credit risk does not increase significantly after initial recognition, it is in the first stage, and the loss provision is measured according to the expected credit loss of the financial instrument in the next 12 months; If the credit risk has increased significantly since the initial recognition, but there is no credit impairment, it is in the second stage, and the loss provision is measured according to the expected credit loss of the whole duration of the financial instrument; If the credit impairment has occurred since the initial recognition, it is in the third stage, and the loss provision is measured according to the expected credit loss of the whole duration of the financial instrument. For financial instruments in the first and second stages, the interest income shall be calculated according to their book balance and effective interest rate; For financial instruments in the third stage, the interest income shall be calculated and determined according to their amortized cost and effective interest rate. (VII) for the financial assets purchased or generated with credit impairment, on the balance sheet date, only the cumulative changes of expected credit losses in the whole duration after initial recognition are recognized as loss reserves, and the interest income is calculated and determined according to the amortized cost of financial assets and the effective interest rate adjusted by credit. The increase or reversal of loss reserves shall be included in the current profits and losses as impairment losses or gains. For the debt instruments held at fair value and whose changes are included in other comprehensive income, the impairment loss or gain shall be included in the current profit and loss, and other comprehensive income shall be adjusted at the same time. The company assesses the expected credit loss of financial instruments based on portfolio. (VIII) for accounts receivable, whether or not it contains significant financing components, the company always measures its loss reserves according to the amount equivalent to the expected credit loss in the whole duration, and the increase or reversal amount of the loss reserves thus formed is included in the current profit and loss as impairment loss or gain. The company combines the receivables according to similar credit risk characteristics (aging), and estimates the withdrawal proportion of bad debt provision of the receivables based on all reasonable and based information, including forward-looking information, as follows:
Accrual proportion of aging receivables (%)
Within 1 year (including 1 year) 5
1-2 years 15
2-3 years 50
More than 3 years 100
If there is objective evidence that a certain account receivable has been impaired, the company will make a single provision for bad debts and recognize the expected credit loss. After the impairment loss of receivables is recognized, if the company obtains objective evidence indicating that the value of the asset has recovered and is objectively related to the events occurring after the loss is recognized (such as the debtor's credit rating has been improved, etc.), the originally recognized impairment loss shall be reversed and included in the current profit and loss. However, the book value after the reversal shall not exceed the amortized cost of the asset on the reversal date assuming that no provision for impairment is made. (IX) prepayments and contract assets adopt the expected credit loss model to recognize the credit impairment loss, which is the same as that of financial assets. Article 10 withdrawal method of inventory falling price reserves (I) if the inventory cost is higher than its net realizable value due to the obsolescence of all or part of the inventory and the change of market price or supply and demand, the inventory falling price reserves shall be withdrawn and included in the current profits and losses. (II) the company shall withdraw the inventory falling price reserves according to the difference between the book cost and its net realizable value at the end of the accounting period, among which the inventory falling price reserves shall be withdrawn according to a single item for inventory goods, work in progress and purchased goods; Raw materials, low value consumables, entrusted processing materials and packaging materials shall be subject to inventory depreciation reserves according to inventory category. (III) if the factors affecting the previous write down of inventory value have disappeared, the write down amount shall be restored and reversed from the originally withdrawn inventory falling price reserve, and the reversed amount shall be included in the current profit and loss. Article 11 withdrawal method of impairment provision for long-term equity investment (I) the company shall withdraw impairment provision for corresponding long-term equity investment under the following circumstances: (1) due to changes in the operating conditions of the invested entity and other reasons, the expected recoverable amount is lower than the book value, and the reduced value cannot be recovered in the foreseeable future. (2) The invested enterprise has incurred serious losses or sustained losses. (3) The invested enterprise has been cleaned up and rectified and cannot continue to operate. (4) Other circumstances that make the recoverable amount of long-term equity investment unable to recover within a certain period of time. (II) the withdrawal scope of impairment provision for long-term equity investment includes long-term equity investment and other long-term interests that substantially constitute the net investment in the invested unit, such as long-term creditor's rights that have no clear settlement plan and are not prepared to be recovered in the foreseeable future.
(III) in case of impairment of other long-term investments, the provision for impairment of long-term investments shall be withdrawn according to the difference between the book value and the recoverable amount. (IV) long term investment impairment reserves shall not be reversed. Article 12 withdrawal method of impairment provision for fixed assets (I) if a fixed asset is impaired, the withdrawal amount of impairment provision shall be determined according to the difference between the book value and the recoverable amount and included in the current profits and losses. (II) in case of impairment of fixed assets, a single impairment test shall be carried out and withdrawn as a single item. (III) if it is difficult to estimate the single recoverable amount of a fixed asset or a fixed asset cannot be separated from other assets to generate independent cash flow, it can be tested on the basis of asset group and impairment provision can be withdrawn. (IV) once the provision for impairment of fixed assets is recognized, it shall not be reversed. Article 13 extraction method of impairment provision for construction in progress (I) if the construction in progress is impaired, the amount of impairment provision shall be determined according to the difference between the book value and the recoverable amount, and shall be included in the current profits and losses. (II) in case of impairment of construction in progress, impairment test and provision for impairment shall be made according to individual assets. (III) if it is difficult to estimate the single recoverable amount of a project under construction or a project under construction cannot generate independent cash flow from other assets, it can be tested on the basis of asset group and impairment provision can be withdrawn. (IV) once the provision for impairment of construction in progress is recognized, it shall not be reversed. Article 14 withdrawal method of impairment provision for intangible assets (I) if an intangible asset is impaired, the amount of impairment provision shall be determined according to the difference between the book value and the recoverable amount and included in the current profits and losses. (II) the provision for impairment of intangible assets shall be tested and withdrawn according to individual items. (III) if intangible assets cannot generate independent cash flow independently of other assets, intangible assets and related assets shall be combined as asset group, and impairment test and impairment provision shall be withdrawn on this basis.
(IV) once the provision for impairment of intangible assets is recognized, it shall not be reversed.
