Beijing Municipality, Verification and Handling of Asset Losses by State-owned Enterprises Trial Measures

Issued: April 8 2002
Effective: May 1 2002
Applicability: The Measures apply where asset losses arise during corporate restructuring or operation transfer of State-owned enterprises and consequently the State-owned enterprise needs to reduce the value of State-owned equity interest in the enterprise. Asset loss refers to bad debt loss, inventory loss, equity investment loss, fixed asset loss, loss on construction projects in progress, guarantee (mortgage) loss and loss on expenses on account for more than five years (Article 2).

Main contents: The Measures lay down the Measures for verification of asset losses of State-owned enterprises (Part Two). Part Three specifies which kind of losses can be recognized as bad debt loss, investment loss or asset loss. Losses on futures, securities and foreign exchange in principle cannot be recognized as asset losses (Article 14).
Reductions in the value of State-owned interest are subject to the approval of the municipal finance department (Section 4, Article 16). Asset losses arising from corporate restructuring such as general corporate restructuring, merger and division may reduce the owner's equity of the restructured enterprise (Article 17). The enterprise may perform a reduction in owner's equity by reducing, in order of precedence, the surplus common reserve, capital common reserve and the paid-in capital (Article 18). An enterprise shall continue to seek repayment of debts that have been approved to be written off (Article 20).