1、 Introduction
On May 10, 2017, the Ministry of Finance issued the newly revised accounting standards for Business Enterprises No. 16 - government subsidies (hereinafter referred to as "CAS 16") and required it to be implemented from June 12 of that year. The old accounting standards for government subsidies in 2006 were hereby abolished (hereinafter referred to as "the old standards"). The announcement of CAS 16 has strengthened enterprises' compliance with the essence of economic transactions to conduct corresponding accounting treatment when receiving relevant government subsidies. In addition, it has further improved the accounting treatment regulations in other aspects, which is a great progress compared with the old standards in 2006. Therefore, this paper makes a comparative analysis on the changes of fiscal discount interest between CAS 16 and the old policy in 2006, and analyzes the changes and the impact on enterprise accounting through actual cases.
2、 Changes in fiscal discount accounting policies related to the old and new standards
（1） Relevant accounting systems of old accounting standards
The old standards clearly stipulated the accounting issues related to government financial discount interest. There are two ways to implement the financial interest subsidy. One is that the relevant departments directly allocate the interest subsidy funds to enterprises, and the other is that the government allocates the funds to loan banks. For the first kind of financial interest subsidy directly allocated to enterprises, according to CAS 16, enterprises need to take it as government subsidy income for corresponding accounting, and the specific accounting treatment needs to be treated differently: if the financial interest subsidy is related to income and compensates the costs and expenses that have been incurred by enterprises, it will be included in "non operating income"; If the financial discount is related to income but compensates for various costs and expenses that will occur in the subsequent period, it will be included in "deferred income" and will be amortized and carried forward later into "non operating income"; If the financial discount is related to the purchase of assets, it will be directly included in the "deferred income" after it is obtained, and its allocation will be carried forward to the "non operating income" with the depreciation (or amortization) progress in the later period of asset use. For the second kind of appropriations directly to the lending bank, "CAS 16" stipulates that enterprises will not do this_ Recognize financial subsidies and make corresponding accounting treatment. The enterprise can directly confirm its corresponding borrowings and borrowing costs with the actual preferential loan interest rate. In addition, the interpretation of the general principles of Enterprise Finance (2007 Edition) also gives the above similar accounting suggestions for financial discount interest, which is commonly known as the "total amount method" accounting. The core idea of this accounting method is that the financial subsidies received directly or indirectly by enterprises are subsidies for various business activities (assets or expenses) of enterprises, so it is more appropriate to treat them with profits and losses. Cai Jian [2012] No. 95 document "measures for the administration of interest subsidy funds of the central government for capital construction loans" stipulates that if the central government grants interest subsidies to enterprises' capital construction loans, the construction in progress will offset the project costs, and the completed projects will offset the financial expenses. The Ministry of Finance Order No. 81 "financial rules for capital construction" has made explanations and provisions on the accounting of financial discount interest. The standard points out that the financial discount interest obtained by enterprises for operating projects, if obtained during the construction period, will directly offset the construction cost during the construction period of the relevant project. If obtained after the project is accepted, it will be accounted in accordance with relevant accounting laws and regulations. The core idea of the above two documents of the Ministry of Finance for the accounting of financial discount interest is the "net method", which stipulates that the financial discount interest obtained by enterprises should offset the asset cost (or financial expenses).
（2） Changes in the latest revised CAS 16 in 2017
1. Changes in accounting classification
CAS 16 redefines the concept of government subsidies, determines government subsidies according to the ultimate beneficiaries, and emphasizes the gratuitousness and source, regardless of the way enterprises obtain them (direct or indirect). Therefore, in view of the situation that the government grants loans to loan banks and enterprises obtain bank loans at preferential interest rates, since the ultimate beneficiary of the grant subsidy is enterprises, the new standards require enterprises to recognize, measure and report this in accordance with government subsidies. On this basis, CAS 16 stipulates different accounting methods for the financial discount interest allocated to the lending bank and the borrowing enterprise according to different allocation objects.
2. Clarification of accounting methods
It can be seen from the above that the old standard in 2006 stipulates that enterprises can calculate the financial discount interest according to the "total amount method" and do not deal with the situation of allocating to the lending bank. CAS 16 for the financial discount interest obtained by enterprises directly or indirectly (after being allocated to the lending bank, the enterprises obtain preferential interest rate loans), the newly revised standards require enterprises to calculate in the way of offsetting borrowing costs, that is, the "net method" accounting. The standard stipulates that the financial discount interest received by enterprises directly offsets the cost of relevant assets or current expenses, or is first included in "deferred income" and then offset by stages at a later stage; That is, like borrowing costs, asset costs are offset when they are eligible for capitalization, and financial expenses are offset when they are eligible for expensing.
（3） The latest revised accounting treatment theory of CAS 16 financial discount in 2017
According to the latest revision of CAS 16 in 2017, the financial discount received by enterprises can be classified according to the following ideas.
First of all, if the relevant government departments directly allocate the financial discount to the enterprise to the lending bank, there are two ways to deal with it: (1) the enterprise is recorded at the fair value of the loan principal and amortized at the effective interest rate to recognize the borrowing costs, and the difference between the recorded fair value and the loan principal is recognized as deferred income and amortized within the duration according to the effective interest rate method to offset the relevant borrowing costs; (2) The enterprise shall record the loan received, and determine the relevant borrowing costs according to the preferential interest rate and loan principal given by the government.
Secondly, if the government directly allocates the financial discount interest to enterprises, enterprises can further classify and deal with it according to whether the financial discount interest is related to the construction of long-term assets. (1) The financial discount obtained is related to the construction of long-term assets: ① during the construction period of the project, the capitalized part offsets the cost, and the expensed part offsets the financial expenses according to the relevant regulations; ② If the project of obtaining financial discount interest has not been started or has been completed, all financial expenses will be offset. (2) The financial discount has nothing to do with the construction of long-term assets: ① if the interest of the subsidized object has been generated before obtaining the discount, the current financial expenses will be directly offset; ② When obtaining the discount interest, the interest of the subsidized object has not been generated, it will be included in the "deferred income" first and will be offset by stages in the future.
3、 Introduction to actual cases
Case 1: as a key enterprise supported by the local government, Huaxia Co., Ltd. was given a financial discount for a special fund loan in 2017 by the local government in accordance with relevant policies and regulations. At the beginning of 2015, Huaxia company obtained a batch of 18 month special loans from the local industrial and Commercial Bank of China, with an amount of 20million yuan, a loan interest rate of 12%, monthly interest, and principal repayment at maturity; The local government agrees to pay a financial discount of 6% to the industrial and Commercial Bank of China on a monthly basis. In this regard, after the financial discount, the actual interest rate of the loan of Huaxia company is 6%; It is assumed that the special loan is used for the construction of a real estate of the enterprise and all meet the capitalization construction. 1. According to CAS 16, if it is treated in the first way above, the fair value of the loan principal is calculated by discounting the loan principal and interest with the effective interest rate, and then the interest adjustment amount that should be amortized in each period is calculated according to the effective interest rate (the specific calculation is omitted). The corresponding accounting treatment is as follows (unit: 10000 yuan):
First, the loans obtained at the beginning of 2015 are recognized at fair value.
Debit: bank deposit 2000
Long term loans - interest adjustment 164
Loan: long term loan - principal 2000
Deferred income 164
The second step is to accrue interest every month (amortize the interest adjustment and deferred income) and include it in the "construction in progress".
Debit: Construction in progress 18.36
Credit: interest payable 10
Long term loans - interest adjustment 8.36
Debit: deferred income 8.36
Loan: Construction in progress 8.36
2. The second method is relatively simple, without complex calculation process. It can be directly recorded according to the loan principal and accrued interest according to the actual loan interest rate after financial interest discount (accounting entries are omitted).
3. Comparative analysis of two different treatment methods. When the government department directly allocates the financial discount interest to the lending bank, the new standard stipulates that enterprises will calculate it as a government subsidy, but it allows enterprises to choose one of the two methods to deal with it according to their own conditions. The two treatment methods have no impact on the assets and profit and loss items of the financial statements, but on the liability structure. The first is recorded as "long-term borrowings" at the fair value of 18.36 million yuan, while the second is recorded as "long-term borrowings" at the price of 20 million yuan. The first unallocated "deferred income" of 1.64 million yuan is other non current liabilities; Affected the debt structure, and the total debt remained unchanged at 20million yuan. Therefore, in practice, enterprises choose the second relatively simple method for accounting.
Case 2: Hongxi company undertakes the infrastructure construction project. Since January 1st, 2016, it has obtained a long-term loan of RMB 50 million from a branch of industrial and Commercial Bank of China for the construction of the project. The contract stipulates that the loan interest rate is 6% and the period is 3 years. As the loan complies with relevant policies, Hongxi company applied for financial discount from the local government.
First, suppose that Hongxi company received the financial discount interest on March 1st, 2016 (the government pays the financial discount interest of the current quarter at the end of each quarter), totaling 30million yuan for the whole year of 2016. Now it is further assumed that Hongxi company will use the special loan of RMB 20 million and RMB 30 million for the construction of the project at the beginning of the year and on July 1 of the year respectively (the RMB 30 million that has not been put into use in the first half of the year is assumed to generate no income); At the end of the first quarter of that year, Hongxi received a fiscal discount of 750 yuan from the government? F yuan. It can be seen from the case that the ratio of capitalization and expensing of borrowing costs in the first quarter of 2016 is 23, so the ratio of offsetting cost of fiscal discount in the first quarter to financial expenses is 23, that is, the offsetting project cost is 3million yuan (=750) × (2/5)). Offset financial expenses by 4.5 million yuan. Accounting treatment: debit "bank deposit" of 7.5 million yuan, credit "project cost" of 3million yuan, and "financial expenses" of 4million yuan. For subsequent processing, proceed by analogy.
Secondly, if the project of obtaining financial discount interest has not been started or has been completed, all financial expenses will be offset. For example, suppose that the financial discount was obtained in 2016, but the project was started on January 1, 2017; In this regard, because the enterprise project has not been started when the financial discount interest is obtained, which does not meet the capitalization requirements, the relevant financial discount interest directly offsets the current financial expenses, that is, debit "bank deposits" and credit "financial expenses". For another example, suppose that the project is completed at the end of 2018, but the financial discount was obtained in April 2019, totaling 5million yuan; As the project has been completed, the financial discount received in 2019 is 5million yuan, which directly offsets the financial expenses of the year, that is, debit "bank deposits" and credit "financial expenses".
Case 3: as a high-tech enterprise strategically introduced by city a, kaiderui Co., Ltd. can obtain a financial discount of 3million yuan from the local government every year, and the discount money is directly allocated to the enterprise.
First, if the interest of the subsidized object has been generated before obtaining the discount, the current financial expenses will be directly offset. In November 2017, the local government allocated 3million yuan to compensate the relevant loan interest incurred by Cadbury in that year, and then debited the "bank deposit" and credited the "financial expenses", with an amount of 3million yuan.
Secondly, if the interest of the subsidized object has not been generated when the discount interest is obtained, it will be included in the "deferred income" first and will be offset by stages in the future. It is now assumed that the company received a financial discount of 3million yuan in December 2017 to subsidize its 2018 loan interest, debit "bank deposits" and credit "deferred income", with an amount of 3million yuan; At the later stage of allocation, debit "deferred income" and credit "financial expenses".
4、 Conclusion
CAS 16 has been implemented since June 12, 2017, and it first mentioned the accounting treatment of financial discount interest. At the same time, the new financial subsidy standards have unified the inconsistency of previous accounting laws and regulations on the accounting treatment of government subsidies. The new standard stipulates that different accounting treatments should be carried out according to the bank or enterprise to which the loan is allocated. From the above analysis, it can be seen that whether it is the 2006 accounting standards for business enterprises, the financial rules for capital construction of the Ministry of finance, or the "CJ [2012] No. 95 document", the relevant accounting treatment provisions for government subsidies are not unified. CAS 16 announced that these problems were solved, and the consistency of the unified treatment method eliminated the confusion of method selection in practical work. First of all, the implementation of the new standards has achieved an effective connection with "CAS 17". For the financial discount, it is essentially a part of the enterprise's loan interest and a deduction of borrowing costs; However, the old standard treats this item as income, which is easy to be confused with other government subsidy income. CAS 16 stipulates that the financial discount interest, whether directly or indirectly allocated to enterprises, requires enterprises to adjust borrowing costs, realize the effective connection with "CAS 17" and effectively distinguish other government subsidy income. Secondly, CAS 16 further narrowed the relevant fiscal and tax differences.
According to the relevant provisions of CS [2008] No. 151 document, the financial discount interest obtained by enterprises from the government for special purposes can be recognized as non taxable income and has no tax obligation. At the same time, the CS [2011] No. 70 document "notice on the treatment of enterprise income tax of special-purpose financial funds" further points out that the depreciation and amortization of assets formed by non taxable income or expenses incurred are not allowed to be deducted before tax. Therefore, if the "total amount method" is adopted for accounting according to the old standards, the fiscal discount interest is included in the income and is non taxable income, and the fiscal and tax differences generated need to be adjusted for tax payment. If the "net amount method" specified in CAS 16 is adopted for accounting, the fiscal and tax differences will be eliminated because the income is not recognized at the time of accounting.