China Regulatory Brief: Accounting Standards Revised, Trial Clearinghouse for Online Payments Launched

Three accounting standards relating to financial instruments revised

The Ministry of Finance (MOF) recently revised three accounting standards relating to financial instruments, namely the Enterprise Accounting Standards No.22—Recognition and Measurement of Financial Instruments, No.23—Financial Assets Transfer, and No.24—Hedging Accounting.

The revisions to these accounting standards mainly cover the following aspects:

• The current four types of financial assets are changed to three types for accuracy and consistency of the accounting treatment;
• Impairment accounting of the financial assets is changed from “incurred loss method” to “expected loss method”;
• The standards of hedging accounting are adjusted to reflect the enterprises’ risk control activities; and
• Some standards regarding new financial instruments are also modified for fairness of relevant accounting treatment.

These revisions are part of the converging trend of Chinese and international accounting standards. According to the implementation schedule of the new standards, enterprises listed in foreign exchange markets are required to implement the new standards as of January 1, 2018. Other enterprises using China’s enterprises accounting standards are required to apply such standards no later than January 1, 2021.

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Trial clearinghouse for online payments launched

The People’s Bank of China has launched a trial run of a new clearinghouse for online transactions among selected banks and payment service providers. Third-party payment providers can now choose to clear online transactions either with the new clearinghouse or UnionPay, but can no longer directly clear transactions with banks.

Through the intermediary of the new clearinghouse, China’s central bank hopes to use standard protocols and rules to tighten supervision of the booming online payment sector.

By the end of 2016, China had about 200 third-party payment providers, which handled RMB 99 trillion in online transactions. The largest third-party payment providers include Alibaba Group’s Alipay and Tencent Holding’s Tenpay.

China’s first VR standards released

China released its first set of standards for virtual reality (VR) technology on April 6 at a forum in Beijing organized by the China Virtual Reality Industry Alliance. The standards lay out performance definitions as well as display and measurement methods for all VR headsets available in the market, namely external, built-in, and molded head-mounted display devices.

According to Lin Ning, a party secretary at the China Electronics Standardization Institute (CESI), the standards were made to normalize and guide the design, production, testing, and experimentation of various VR headset display devices.

The chief engineer of China’s Ministry of Industry and Information Technology, Zhang Feng, said the standards will be important in promoting the development of China’s VR industry and hardware market, which he believes to still be in its infancy.

The development of the standards was led by CESI in consultation with other research institutions and manufacturers, including the Beijing Institute of Technology and Chinese tech giant Xiaomi. Further VR standards governing content and other related products are expected in the near future.

Xiaomi, along with other Chinese tech companies such as Alibaba, Baidu, and Huawei, have invested heavily in VR. In addition to these companies, there are over 100 smaller VR headset manufacturers in China.

Opinions sought for priority review of patents

On April 7, China’s State Intellectual Property Office (SIPO) released a notice to seek opinions about the draft Measures for Administration of Priority Review of Patents. As per the draft, a request for priority review of a patent application or patent review may be made for cases under the following conditions:

1. Those involving national key industries such as energy conservation, environmental protection, next generation information technology, bio-engineering, high-end equipment manufacturing, new energy, new materials, new energy vehicles, and intelligent manufacturing;
2. Those specifically encouraged and supported by provincial and municipal governments; and
3. Those involving the Internet, big data, cloud computing, and frequently updated technologies.

Priority review of patents can also be requested for other special circumstances.

Under the priority system, a design/utility patent application will be resolved within two months, an invention patent registration within one year, and a review within seven months. Generally, it takes one year to register a design/utility patent in China, and three to five years to register an invention patent.

Opinions on the draft measures are due by May 6, 2017.

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