Laws of the People's Republic of China

Guo Zi Ping Jia [2003] No.58

Each central enterprise,

With a view to finding out the asset status of central enterprises, verifying the asset quality of central enterprises, promoting enterprises to implement the Enterprise Accounting System, and well making the outstanding achievement assessment, performance evaluation and maintenance and increment of state-owned capital of the enterprises, this Commission has decided to organize central enterprises to make asset verification in a planned way as of September 2003. The Work Scheme for Asset Verification of Central Enterprises is hereby printed and distributed to you, please earnestly execute and implement it in light of the actualities of your respective enterprises and timely report the related situations and problems faced in the work.

The State-owned Asset Supervision and Administration Commission of the State Council

September 2, 2003

Work Scheme for Asset Verification of Central Enterprises

For the purpose of meeting the needs of the reform on state-owned economy administration system and the supervision and administration on state-owned assets of China, earnestly implementing the Interim Regulation on the Supervision and Administration over State-owned Assets of Enterprises, finding out the asset status of central enterprises, verifying the asset quality of central enterprises, and creating conditions for central enterprises to execute the Enterprise Accounting System and to well make outstanding achievement assessment, performance evaluation and maintenance and increment of state-owned capital of enterprises, the State-owned Assets Supervision and Administration Commission (hereinafter referred to as the SASAC) has decided to organize the central enterprises to carry out asset verification on a phased basis as of September of 2003.

1.

Objectives of the asset verification

(1)

To comprehensively find out the asset status of central enterprises, to faithfully uncover the conflicts and problems existing in enterprises, to truthfully and completely reflect the asset status, financial status and business achievements of enterprises and to enhance the quality of the accounting information of enterprises.

(2)

To comprehensively check and verify the asset losses of central enterprises and cope with the losses in light of the policies of the state on asset verification, to promote enterprises to solve the problems that remain unsettled due to historical reasons, and to create conditions for the implementation of the Enterprise Accounting System.

(3)

Through asset verification on public institutions affiliated to the central enterprises, to verify the status on asset and rights and interests of the public institutions, to regulate the accounting and financial reporting system of the enterprises, and to promote the real reflection of the business strength of the enterprises.

(4)

To comprehensively check and verify the various kinds of assets, debts and ownership rights of overseas subsidiaries affiliated to the central enterprises, to regulate the financial supervision and administration and the financial reporting system of overseas enterprises, and to promote and intensify the supervision and administration on overseas state-owned assets.

2.

Arrangements for the asset verification

With a view to co-operating the central enterprises to implement the Enterprise Accounting System, the asset verification of central enterprises, under the control of the SASAC, shall start from September 2003. The major tasks of asset verification shall be finished within 5 months respectively and the whole work shall be completed on October 10, 2004. The work shall be carried out in phases as follows,

(1)

Prophase Preparation (Form June to August in 2003). Based on the investigation and queuing of the central enterprises, the phased work plan for asset verification of central enterprises shall be proposed, the Work Scheme for Asset Verification of Central Enterprises, the Measures for Asset Verification of State-owned Enterprises and the related supporting systems shall be formulated, and the work documents, statements and software shall be distributed to lower departments.

(2)

Work Arrangement (At the beginning of September, 2003). Arrangements for asset verification of central enterprises shall be made, leading organizations and work agencies shall be determined, and tasks of asset verification shall be set forth. The central enterprises shall determine or establish corresponding organizations or work agencies, formulate feasible work schemes and organize and carry out mobilization.

(3)

Training (September 2003). It has been planned to arrange for 2 trainings on asset verification of central enterprises to train the verification work staff, concretely explain the policies, systems and measures for asset verification and the statements and software of asset verification.

(4)

Organization and Implementation. The central enterprises shall be organized to conduct asset verification in groups, to comprehensively fulfill such major tasks as financial clearance, assets check and data assembling and reporting, etc., and the whole work shall be completed by October 2004.

3.

Time for asset verification

With a view to guaranteeing the smooth progress of various work of asset verification of central enterprises, the asset verification of central enterprises shall be organized and carried out on a phased basis and in groups, in light of the actualities of the enterprises and the master arrangement of the state on the execution of the Enterprise Accounting System. The specific arrangements are as follows:

(1)

The related central enterprises that have applied for or started the execution of the Enterprise Accounting System before 2002 shall, in light of the related e requirements of the Ministry of Finance, carry out the related capital verification and directly report the results to the SASAC on the handling of the asset losses, and may be exempted from further asset verification.

(2)

As for the central enterprises applying for executing the Enterprise Accounting System in 2003, the time of the major work of asset verification is from September to December in 2003. The starting point for asset verification shall be December 31, 2002, and the whole work shall be completed before the end of March 2004.

(3)

As for the central enterprises applying for executing the Enterprise Accounting System in 2004 or 2005, the time for the major work of asset verification shall be January through June of 2004. The starting point for asset verification shall be December 31, 2003, and the whole work shall be completed before the end of October 2004.

(4)

Separate arrangements for asset verification shall be made for the Chinese-funded enterprises whose head offices are in Hong Kong and Macao and other enterprises under special circumstances.

4.

Contents of asset verification

(1)

Financial clearance, which refers to, based on the start point for asset verification, making comprehensive checkup and clearance of the various kinds of accounts, accounting vouchers, and accounting books of the parent companies and their affiliated enterprise or public institutions, and the information on the internal capital transactions and borrowings within the enterprises, and thus to make the accounts consistent with each other, the accounts consistent with the vouchers, and the accounts consistent with the statements.

(2)

Assets checkup, which refers to making comprehensive clearance, checkup and verification of the various assets of the enterprises. Emphasis shall be attached to the checkup of the various kinds of receivable and prepaid accounts, external investments and off-book assets, and the check of related mortgages and guarantees of the enterprises.

(3)

Value re-evaluation, which refers to re-evaluating, according to the methods and standards of the state, the major fixed assets and current assets of the enterprise that deviate from the book value and actual value to a considerably large extent.

(4)

Determination of gains and losses, which refers to determining the various kinds of asset gains and losses and the on account funds reported by the enterprises according to the policies on asset verification and the related financial accounting systems of the state, and making determination for the estimated losses for execution of the Enterprise Accounting System.

(5)

Capital verification, which refers to, in light of the results of asset verification, such as asset surplus, asset losses, on account funs and so on reported by the enterprises, organizing the examination and granting approval to the financial treatment in accordance with the policies on asset verification and the related financial accounting systems of the state, and re-determining the amount of state-owned capital that are actually occupied by enterprises.

(6)

Improving system, which refers to that an enterprise shall, after finishing the asset verification, carefully analyze the problems existing in the daily management of assets and finance, bring forward corresponding rectification measures and the implementation plans for the Enterprise Accounting System, gradually improve and perfect all kinds of rules and systems, solidify the achievements of asset verification and prevent future disorder after the verification work.

5.

Organization and leadership for asset verification

The asset verification of central enterprises shall be subject to the unified leadership and organization of the SASAC and be carried out in a phased way, and the major problems related to asset verification shall be decided by the SASAC through consultation. The central enterprises shall organize their affiliated enterprises and entities to carry out asset verification.

(1)

The SASAC shall take charge of the work arrangement for asset verification of central enterprises, formulation of the rules and systems and work schemes of asset verification, and supervision, direction and inspection on asset verification of enterprises and the auditing work of the intermediary agencies.

(2)

The central enterprises shall, by considering their respective actualities, set up the leader group of asset verification and designate related internal bodies or set up interim offices to be responsible for the organization and implementation work.

(3)

The asset verification of the public institutions and overseas enterprises affiliated to the central enterprises shall be conducted in light of the unified arrangements and requirements of asset verification of central enterprises, and the specific implementation shall be organized and carried out by considering their financial subordination relationships.

6.

Requirements for asset verification

With a view to guarantying the quality of asset verification and to improving the work efficiency, the central enterprises conducting asset verification shall accord with the following work requirements,

(1)

Central enterprises shall earnestly implement the Measures for Asset Verification of State-owned Enterprises and other systems in their asset verification work, guarantee that the verification is all-around and thorough, avoid repetitions and omissions, and ensure consistence between the accounts and facts, earnestly find out the asset status of the enterprises, and guarantee the truthfulness and reliability of the results of the asset verification.

(2)

Central enterprises shall adhere to the principle of being practical and realistic during asset verification and uncover the existing problems in accordance with the facts. For any asset loss that has been sorted out, the enterprises shall obtain the valid evidence or economic appraisal materials with legal effects in light of the related requirements, and may not make falsified report or hide the facts in the report.

(3)

As for the asset losses and account funds sorted out, the central enterprises shall make careful clearance, classification and sequencing, find out the reasons, and shall bring forward handling opinions through deliberation by considering the actualities of the enterprises and in light of the policies on asset verification and the relevant financial accounting systems of the state.

(4)

As for all the bad creditor's rights, bad investments and the loss of assets in kind that have been written off upon approval, the central enterprises shall set up the management system of "records of written-off accounts", earnestly intensify the related management work, organize personnel or establish special institutions to continue the checkup and recourse and thus to prevent the loss of state-owned assets.

(5)

Central enterprises shall, through asset verification, faithfully reflect the conflicts and problems existing in the management of entities affiliated to them, classify and sequence the entities that have become insolvent and can not continue the business on the basis of careful investigation and study, and shall merge, suspend the business of, cancel, sell or declare bankruptcy of such entities in accordance with law, and thus to speed up the adjustment of the organizational structure of the enterprises and promote the increase of overall efficiency and benefits of the operation of state-owned capital.

(6)

Except for the special enterprises involving state security, the central enterprises shall entrust the qualified private intermediary institutions to audit the results of asset verification, and the auditing reports of enterprise asset verification shall be submitted.

(7)

The central enterprises shall, during asset verification, designate special institutions and persons to be in charge of promptly reporting to the SASAC (the Bureau of Statistics and Evaluation) the work progress, existing problems, work structure and opinions and suggestion through the forms of brief, reflection, topic report or phase summary, etc.