The relevant person in charge of the Accounting Department of the Ministry of Finance answered reporters' questions on the issuance of the Accounting System of Non-governmental Non-profit Organizations

The relevant person in charge of the Accounting Department of the Ministry of Finance answered reporters' questions on the issuance of the "Accounting System for Non Profit Organizations in the Private Sector"

January 3, 2025 Source: Accounting Department

In order to further standardize the accounting of non-profit organizations and improve the quality of accounting information, the Ministry of Finance recently revised and issued the "Accounting System for Non Profit Organizations" (hereinafter referred to as the "Accounting System for Non Profit Organizations"). The person in charge of the Accounting Department of the Ministry of Finance answered questions from reporters on relevant issues.

Q: What is the necessity of revising the "Civil Non Accounting System"?

Answer: The "Civil Non Profit Accounting System" formulated and released in 2004 was the first accounting system formulated for civil non-profit organizations (hereinafter referred to as "civil non-profit organizations") in China, filling a gap in China's accounting system and playing a positive role in regulating the accounting behavior of civil non-profit organizations, improving the quality of accounting information, and promoting the healthy development of civil non-profit organizations. In 2020, the "Interpretation on Several Issues Concerning the Accounting System for Non Profit Organizations" was released, which further clarified the accounting treatment of economic business matters related to non-profit organizations and responded to practical concerns. In recent years, there have been some changes in the relevant laws and regulations, industry supervision, and the business activities of civil non organizations. It is necessary to timely revise and improve the "Civil Non Accounting System" to solve practical problems and help civil non organizations develop with high quality.

The revision of the 'Non Accounting System for Civil Servants' is an important measure to implement the decisions and arrangements of the Party Central Committee on the development of social organizations.   The revision of the 'Civil Non Accounting System' is an important measure to implement the decisions and arrangements of the Party Central Committee on the development of social organizations from the perspective of standardizing accounting.

The second is that revising the 'Civil Non Accounting System' is an inevitable requirement to adapt to the laws, regulations, and regulatory systems of civil non organizations. The relevant laws and regulations of non-governmental organizations are constantly revised and improved, and the management requirements of industry regulatory authorities and supervisory departments are constantly strengthened, which puts forward new requirements for the accounting information quality and accounting standardization of non-governmental organizations. Therefore, revising the "Civil Non Accounting System" is conducive to promoting the effective connection between the accounting system and relevant laws and regulations, and promoting the rule of law development of civil non organizations; Beneficial for the coordination between accounting systems and industry management, promoting high-quality development of non-governmental organizations; It is conducive to the formation of policy synergy between accounting systems and regulatory regulations, promoting the standardized development of non-governmental organizations.

The third is to revise the 'Civil Non Accounting System', which is a system guarantee for standardizing the accounting of civil non organizations, improving management level, and promoting high-quality development. The scale and number of non-governmental organizations continue to expand, and many new businesses and situations have emerged. For example, the forms of donations continue to diversify, the types and amounts of external investments continue to increase, and new initiatives such as funding the establishment of other non-governmental organizations have emerged. In order to adapt to the needs of practical development, record and reflect new business activities, and solve accounting treatment problems that arise after model innovation, it is necessary to revise the "Civil Non Accounting System" in a timely manner.

Q: What process did the revision and release of the 'Non Accounting System for Civil Servants' go through?

Answer: In 2022, we officially launched the revision of the "Civil Non Accounting System" and invited multiple expert teams to conduct research on specific topics, laying the theoretical foundation for the system revision. Since 2023, in-depth research has been conducted on the accounting situation of non-governmental organizations, and sufficient exchanges have been held with regulatory agencies, business supervisory units, foundations, social organizations, social service agencies, religious sites, and domestic representative offices of overseas non-governmental organizations. The revised content has been discussed item by item, and key issues have been discussed in a special topic. Based on this, a draft for soliciting opinions has been formed, which will be issued in August 2024 and publicly solicited for opinions from relevant units of the State Council, local finance departments, and the general public.

Since the issuance of the draft for soliciting opinions, all relevant parties have actively provided feedback. Overall, the feedback suggests that the revision of the "Civil Non Accounting System" is helpful in solving practical accounting problems for civil non organizations, has strong operability, and has practical significance in improving the quality of accounting information and serving the high-quality development of civil non organizations. We have comprehensively reviewed and analyzed the feedback, fully absorbed the opinions of all parties, and coordinated and communicated with industry regulatory authorities, supervisory departments, tax departments, etc. After revision and improvement, we have formed a draft for review. After completing the review and approval procedures, it was officially issued in December 2024.

Q: What are the main contents of the "Civil Non Accounting System"?

Answer: The Civil Non Accounting System consists of two parts: the main text and the appendix.

The main text consists of eight chapters and ninety-five articles. Chapter One General Provisions consists of thirteen articles, mainly elaborating on the overall requirements of the formulation purpose and basis, scope of application, accounting basis, and basic principles of the Civil Non Accounting System. Chapters 2 to 6 contain a total of 66 articles, which regulate the recognition and measurement of accounting elements such as assets, liabilities, net assets, income, and expenses of non-governmental organizations. Chapter 7 Financial Accounting Reports consists of fourteen articles, mainly regulating the types of accounting statements, preparation requirements, accounting policies, changes in accounting estimates and error corrections, and notes to accounting statements for non-governmental organizations. Chapter 8 has two supplementary provisions, mainly regulating the implementation date and the connection with the original system.

The appendix consists of six parts. The first part provides a general explanation of accounting subjects, accounting vouchers, accounting books, financial accounting reports, etc. The second and third parts clarify the specific settings, accounting content, and main accounting treatments of 56 accounting subjects. The fourth to sixth parts clarify the format and preparation instructions of the balance sheet, statement of business activities, and cash flow statement, as well as the content of the notes to the financial statements.

Q: What are the main contents of the revision of the Non Accounting System for Civil Servants?

Answer: 1. Add some accounting treatment regulations.

One is to increase the types of organizations that are subject to applicable regulations. According to relevant regulatory requirements and practical opinions, international social organizations, foreign chambers of commerce, and representative offices of overseas non-governmental organizations registered and established in China in accordance with the law have been added to the scope of application of the system. In line with laws and regulations such as the Civil Code of the People's Republic of China, the Charity Law of the People's Republic of China, and the Implementation Regulations of the Enterprise Income Tax Law, three characteristics of civil non-governmental organizations have been modified. In line with the Regulations on Religious Affairs, temples, palaces, mosques, and churches are unified as places for religious activities.

The second is to increase the accounting treatment regulations for service donations. In recent years, the forms and quantities of service donations have been increasing, and it is necessary to recognize the income and costs generated by service donations. To this end, accounting regulations for service donations have been added, namely: for service donations received by non-governmental organizations, if the donor provides relevant vouchers such as invoices, and the amount indicated on the vouchers can reflect the fair value of the received services, the non-governmental organizations should account for it according to the voucher amount and disclose it in the notes to the financial statements.

The third is to increase the risk reserve and other relevant accounting regulations. Regulatory requirements require some non-governmental organizations to establish a risk reserve system. For example, the "Interim Measures for the Management of Value Preservation and Appreciation Investment Activities of Charitable Organizations" stipulate that charitable organizations can establish a risk reserve system, and the "Implementation Regulations of the Law on the Promotion of Private Education" stipulate that private schools implementing preschool education and academic education should establish special funds or funds. For this purpose, relevant regulations have been added, which stipulate that non-governmental organizations shall, in accordance with relevant national laws, administrative regulations, etc., withdraw risk reserves, special funds, or funds from unrestricted net assets to restricted net assets based on the actual withdrawal amount.

The fourth is to add some accounting subjects. In order to meet the needs of practical accounting and supervision, the following subjects are mainly added: adding the subject of "other long-term investments" to account for other long-term investments held for more than one year, except for equity and debt; Add the account of "long-term deferred expenses" to account for deferred expenses with an amortization period of more than one year in practical accounting; Add the account of "adjustment of net assets in previous years" to account for the correction of previous period errors discovered in this year; Add the subject of "taxes and surcharges" to account for various taxes and surcharges incurred in the business activities of non-governmental organizations; Add the subject of "income tax expenses" to account for the income tax expenses that non-governmental organizations should pay.

Fifth, increase the requirements for relevant information disclosure. Strengthen disclosure of related parties, requiring non-governmental organizations to disclose the nature of related party relationships, transaction types, and transaction elements in the notes to financial statements, and also require disclosure of explanations on the establishment of branch offices and representative offices. Refine the disclosure requirements for long-term equity investments. For long-term equity investments that have control, joint control, or significant influence over the investee, the degree and changes in the impact on the investee, as well as the net profit or loss achieved by the investee in the current year, should be disclosed. Increase disclosure of the situation of principals and trustees serving as charitable trusts, including the establishment, changes, termination, handling of trust affairs, and property status of all participating charitable trusts.

2. Revise some accounting treatment regulations.

One is to modify the accounting treatment method for restricted net assets. To meet practical needs, we have simplified the reclassification requirements for restricted net assets, distinguishing between restricted and non restricted accounting for various income and expenses incurred by non-governmental organizations. At the end of the period, restricted income and expenses will be directly transferred to restricted net assets, eliminating the requirement for restricted net assets to be reclassified as non restricted net assets when in use. The revised accounting treatment method is more helpful for accounting personnel to understand and operate, and improve accounting efficiency.

The second is to modify the accounting treatment method for long-term equity investments. Modify the equity method and cost method accounting for long-term equity investments to uniformly use the cost method accounting, and add relevant disclosure requirements. The main consideration is that non-governmental organizations pay more attention to the monetary funds that can be used for various project expenditures, and the accounting treatment method of cost method plus provision for impairment is more in line with the business characteristics and management requirements of non-governmental organizations. The resource providers of non-governmental organizations invest resources in non-governmental organizations without obtaining economic returns and without the concept of owner's equity. The cost method is more in line with the characteristics of non-governmental organizations. At the same time, we have increased disclosure requirements to separately reflect the net profit achieved or net loss incurred by the invested entity in the current year, fully meeting the needs of information users.

The third is to modify the accounting content of management expense accounts. Considering the different nature of management expenses and asset impairment losses, we have separated asset impairment losses from the accounting content of the "management expenses" account and added the "asset impairment losses" account for accounting.

3. Delete the requirement for consolidated reports.

Practice has shown that users of accounting information in non-governmental organizations currently do not have a demand for the use of consolidated financial statements. They mainly focus on the accounting information in individual financial statements. Therefore, in this revision, the requirement for non-governmental organizations to prepare consolidated financial statements has been removed, and related information has been strengthened in the notes to the financial statements.

Q: How will the finance department provide guidance on the implementation of the Non Accounting System for Civil Servants?

Answer: The "Civil Non Accounting System" will be implemented in civil non organizations from January 1, 2026. We will carry out the following work to promote the effective implementation of the "Civil Non Accounting System": firstly, timely introduce relevant regulations on the connection between the old and new accounting systems, provide policy guarantees for civil non organizations to implement the "Civil Non Accounting System", and ensure the smooth connection and transition of the old and new accounting systems. The second is to organize training on the "Civil Non Accounting System" in conjunction with civil affairs and other departments, so that civil non organizations can quickly familiarize themselves with and master the new system, and ensure the effective implementation of the "Civil Non Accounting System". The third is to track and pay attention to the implementation of the "Civil Non Accounting System", respond to practical issues in a timely manner, strengthen implementation guidance, and improve the effectiveness of the implementation of the "Civil Non Accounting System".