7 january 2001
The relevant ministries and commissions of the state council, the provincial, autonomous and municipal governments directly under the central government, the financial departments of the planned municipalities, the finance department of the xinjiang production corps and the central enterprise group company:
The provisions on accounting treatment in the reform of the enterprise housing system are being issued to you for compliance. Please write to my department in a timely manner about any problems with implementation. This circular has been in force since 7 january 2001 and the circular of the ministry of finance on the issuance of supplementary provisions for the accounting processing of the enterprise housing fund (custom 14) has been abolished。
Annex: provisions on accounting treatment in the reform of the enterprise housing system
Copies: ministry of finance offices in provinces, autonomous regions, municipalities directly under the central government, and separate municipal offices of financial ombudsmen。
Annex
Reform of the enterprise housing system
Provisions on accounting treatment issues
In the spirit of the circular of the state council on the further deepening of the reform of the urban housing system and the acceleration of the construction of housing, no. 23, the physical distribution of housing began to be suspended in the second half of 1998 with the gradual monetization of housing distribution. Following the discontinuation of the in-kind allocation of housing, new affordable housing is in principle sold only without rent. In order to ensure the smooth implementation of the reform of the enterprise housing system, the accounting treatment of the reform of the enterprise housing system is as follows:
The elimination of the “housing working capital” subject and the balance of the enterprise's housing working capital account as at 1 january 2001, i. E., the balance at the beginning of the implementation of the “notice on the financial processing aspects of the reform of the enterprise's housing system” (finance 295), are dealt with as follows:
(i) general enterprises, the balance of which is fully adjusted for undistributed profits at the beginning of 2001, debited to the “housing working capital” line and credited to the “profit distribution - undistributed profits” line; for example, the “housing working capital” line is a debit balance, with a reverse accounting entry. The balance of the debit in the “housing working capital” line is transferred to the “profit allocation - undistributed profit” after the subject, the relevant owner's interest items are duly eliminated and the “surplus pool - public good”, “surplus pool - general surplus stock”, “capital pool” is debited to the “profit distribution - undistributed profits” subject。
(ii) s. A., whose credit balances were fully adjusted for the undistributed profits at the beginning of 2001, debited to the “housing working capital”, credited to the “profit distribution - undistributed profession”; for example, “housing working capital” is the debit balance, treated as follows:
The balance of the housing working capital of a limited company established prior to february 1995, as well as the additional housing working capital debit balance of a limited company established after february 1995 with the approval of the establishment of a state-owned equity, transferred the balance of the “housing working capital” debit to the “profit distribution - undistributed profits” line at the beginning of 2001, debiting the “profit distribution - undistributed profits” line to the “housing working capital”. After consideration and approval by the shareholders' assembly of the elimination of the relevant owner's interest item, the crediting of the “surplus pool - statutory public good, arbitrary surplus, statutory surplus stock”, “capital pool” is credited to the “profit distribution - undistributed profits”。
A limited company, established after february 1995, with the approval of the establishment of a state-owned equity, with a working capital debit balance for housing, has established a separate account for the “compensation of housing working capital” line under the “capital pool” heading and transferred the debit balance for the “housing working capital” line to the “capital capital - housing working capital” line on 1 january 2001, with a credit for the “capital capital stock - housing working capital” line. When the company compensates for the dividends to be shared by the state shareholders in subsequent years, the “payable dividends” line is debited and credited to the “capitalization - make-up of housing working capital”. If the company transfers equity from capital or surplus in subsequent years, it shall, at the time of the transfer of equity, credit to the “equity” or “surplus” classes, in proportion to the share of the state equity, less the share of the state shareholders, and be credited to the “equity” class, and to the “capitalization - the housing working capital”。
Reserve items in capital pools shall not be used to offset debit balances in the “housing working capital” line。
In accordance with the above-mentioned principles, the corporation is required to pay a lump-sum housing allowance to elderly homeless workers who were employed prior to 31 december 1998 and a lump-sum housing allowance to compensate for substandard old workers。
Before the implementation of the new housing system, the right to use only the housing allocated to the employee is regulated by the following rules:
(i) if an enterprise processes an ownership act and acquires title to the dwelling, it shall credit the “fixed assets” subject to the “bank deposit” subject, etc., and then transfer the amortized value of the previously acquired right to use the dwelling to the fixed asset value, and the “fixed assets” to the “intangible assets—right to use the house” subject. When the house is sold to employees, it shall be credited to the fixed assets net book value, debited to the “fixed assets clean-up” line, depreciated, debited to the “cumulative depreciation” line, credited to the “fixed assets” line; proceeds from sale, debited to the “bank deposit” line, credited to the “fixed assets clean-up” line; required withdrawal of the shared equipment, public facilities maintenance fund, debited to the “fixed assets clear-up” line, credited to the “other dues” line; net proceeds from the sale of housing, credited to the “housing working capital” line to the “fixed assets clean-up” line; and, for net losses, credited to the “housing working capital” line。
(ii) if an enterprise sells a dwelling by the original property unit without taking title to it, the right to use the dwelling, which is included in the scheme for selling the dwelling in the original property unit, is credited to the “intangible asset - the right to use the dwelling” on the basis of a document issued by the original property unit (a copy of the approved sales programme and payment certificate from the employees of the unit)。
Following the implementation of the new housing system, the sale of employee housing by enterprises should be treated differently:
(i) the sale of the full title to the employee's house shall be subject to accounting treatment in accordance with the sale of fixed assets. The enterprise shall account for the net book value of the employee's housing by debiting the “fixed asset clean-up” subject to depreciation, the “cumulative depreciation” subject to depreciation, and the “fixed asset” subject to the original value of the employee's housing; the proceeds from the sale, such as the “bank deposit”, to be credited to the “fixed asset clean-up” subject; the maintenance fund to be drawn from the sale of the house, to be debited to the “fixed asset clean-up” subject to be credited to the “other due”; and the maintenance fund to be credited to the “bank deposit” subject when transferred to the appropriate unit for management or use. Net proceeds from the sale of housing are debited to the “rigid asset clean-up” line and credited to the “extra-business income - net proceeds from the disposal of fixed assets” line; in the case of net losses, to the “rigid asset clean-up” line。
(ii) the sale of the employee's share of the property in the home shall be subject to accounting treatment in accordance with the terms of the sale of the full title。
(iii) income from the sale or rental of part-owned housing by enterprise employees, debits to such items as “bank deposits”, credited to the “out-of-business income - the share of housing income”。
(iv) if the enterprise sells the state-owned housing, the employee re-sells the house, the enterprise is required to receive the equivalent of the price of the land concession and the proceeds received in return, debiting the “bank deposit” to the “extra-business income - the share of the housing income”。
4. The enterprises shall grant employees various types of housing allowance, which shall be dealt with:
(i) the enterprise is required to grant the employee a housing rental allowance and housing hardship allowance, crediting such items as “manufacturing costs”, “management costs” and crediting such items as “payable wages”, “cash”。
(ii) a one-time housing allowance for elderly homeless workers who participated in work prior to 31 december 1998 and a one-time housing allowance for the unsatisfied old workers shall be credited to such items as “other dues”, in the amount actually paid, on the basis of the “profit distribution—undistributed profits”; the resulting negative undistributed profits shall be treated in accordance with the principle of this provision. When the enterprise is required to store the housing allowance to be paid to the employee, the “other dues” are credited to the “bank deposits” subject。
(iii) the enterprise pays monthly housing allowance to elderly homeless workers and new workers who have worked since 1 january 1999, crediting such items as “manufacture costs”, “management costs”, etc., and crediting to such subjects as “payable wages”。
The enterprise is required to supplement the housing subsidy for the year 1999 by crediting the line “assisting gains and losses from prior years” to credits such as “other dues”; and by transferring the balance of the line “assisting gains and losses from prior years” to the line “profit distribution - undistributed profits” to crediting to the line “assets from prior years”。
An enterprise is required to credit the “bank deposit” when depositing the housing allowance to be paid to employees, by debiting the “pay due”, “other contributions due”。
(iv) an enterprise's prescribed subsidy for housing heating costs, debiting the subject of “administrative expenses”, crediting to such subjects as “bank deposits”。
The enterprise receives rental income for its own and escrow housing, debits “cash”, “bank deposits” and credits to “other operating income”; and incurs maintenance, administrative costs and other cost expenses incurred by the enterprise in respect of unsold housing, as prescribed by the state, for housing improvements, debits to “other operating expenses” and credits to “cash” and “bank deposits”。
6. The housing lease bond charged by the enterprise and the construction money paid to employees for the condition of co-financing and cooperative construction are debited to “cash”, “bank deposits” and credited to “other accounts payable”. After construction of the housing units built by the enterprises in the form of joint employee fund-raising, they are treated as escrow assets and are registered in the books of accounts。
7. The required contribution of the enterprise to the housing provident fund is credited to the “other dues” by debiting the subject “management costs”. The housing provident fund, which is to be paid by individuals, is credited to the “other dues” by debiting the “pay due”. In practice, “other dues” are debited and credited to “bank deposits”。
The removal of the “housing working capital” item in the “balance sheet”。
The accounting treatment relating to the reform of the housing system as a non-adjustment of post-balance sheet transactions should be reflected in the notes to the accounting statements in the external financial accounting reports for the year 2000; the balance of the housing working capital at the time of processing should be disclosed in detail in the financial accounting reports for subsequent years, the amount to be offset by the owner's interest (or shareholder's interest), the amount not yet processed, and the housing working capital to be covered by dividends to be shared by state shareholders。
