Chapter I General Provisions
　Article I The present regulations are formulated to strengthen the accounting work of the joint ventures using Chinese and foreign investment, inaccordance with the provisions laid down in " The Law of the People 's Republic of China on Joint Ventures Using Chinese and Foreign lnvestment" " The lncome Tax Law of the People' s Republic of China Cnncerning Joint Ventures With Chinese and Foreign lnvestment" and other relevant laws and regulations.

　Article 2 These regulations are applicable to all joint venture. using Chinese and foreign investment ( hereinafter referred to as joint ventures) established within the territory of the People' s Republi of China

　Article 3 The public finance departments or bureaus of provinces autonomous regions and municipalities directly under the Central Government as well as the business regulatory departments of the State Council sha1l be permitted to make necessary. supplements to these regulations on the basis of complying with these regulations and in the light of specific circumstances, and submit the supplements to the Ministry of Finance for the record .

　Article 4 A joint venture shall work out its own enterprise accounting system in accordance witb these regulations and the supplementary provisions made by the public finance department or bureaau of the provance , autonomous region or municipality , or by ihe relevant business regulatory departments . of. tbe State Council , and in tbe light of tbe specific circumstanoes and submit its own system to the enterprise regulatory department local public finance department and tax authority for the record .

Chapter II 　Accounting Office and
Accounting Staff

　Article 5 a joint venture shall set up a separate accountingt office with necessat.y accounting staff to handle its financial and accounting work .

　Article 6 A joint venturtt of large or medium. size shall have a controller to assist the president and take the responsibility in leading its financial .and accounting work . A deputy controller may also be appointed when necessary . A joint venture of relativelv large size shall have an auditor responsible for review and examination of ist finalcial receipts and disbursements, accounting documents, accouting books, accounting statements and other relevant data and those of its subordinate branches .

　Article 7 The accounting office and accounting staff of a joint venture shall fulfil their duties and responsibilicies with due care, make .ccurate calcuiation, reflect faithfully the actual conditions, and supenitise sirictly over all economitt transactictns. protect the legitimate rights and interests of all the participants t.f the joint ventntre .

　Article 8 Accounting si.IY who are transfbrred or leaving their posts shall clear their responsibility transtions , and shall not interrupt tbe accounting work .

Chapter III 　General lhinciples for. A ccounting

　Article 9 The accounting work of a joint venture must comply with the laws and regulatioas of tbe People's Republic of China .

　Article 10 ihe fiscal year of . joint veature sball run from J anuary 1 to Decefbber 3 I under the Gregorian calendar . .

　Article 1 1 A joint venture sball adopt tbe debit and credit double entry bookkeeping .

　Article 1 2 The accounting docutaents , accounting books , accounting statements and tbe other accounting records of a joint venture shall be prepared accurately and promptly according to tbe transactions actually taken place with all required routiaes done and contents complete .

　Article 13 All tbe accounting documents , accounting books and accouning statements prepared by a joint venture must be written in Chinese . A foreign language mutually agreed by the participants of the joint venture may be used concurrently . ,

　Article 14 ln priaciple , a joint venture shall adopt Renminbi as its bookkeeping base currency . However, a foreign currency may be used as .the bookke.piag base currency upon mutual agreement of the participants of a joint venture . If actual receipts or disbursemeats of casb , bank deposits , otber casb boldiags , claims , debts , incotne and expenses , etc . , are ntade in curreacies otber than tbe bookkeeping base currency , record shall also be made in the currencies of actual receipts or disbursements .

　Article 15 A joint venture sball adopt the accrual basis in its accounting . All reveaues realized -and expeoses incurred during tbe curreat period. shall be recognized in tbe current period , regardless o f wbetber the receipts or disbursements are made . The . revenuesor . expenses not attributable to the current period shall not be recognized as. current reveoue Or expenses , even if they are currently received or disbursed .

　Ardcle 16 The re.enues aod expenses of a joint venture must be matched in its accounting . All tbe revenues and relevant cost and expenses . of a period shall be recognized in the period aad sball aot be dislocated , advanced or deferred .

　Article 17 All tJhe assets of a joint venture shall be stated at their original costs and the rec0rded amounts are generally not adjusted whether there is any fluctuation in their prices .

　Article 18 A joint venture shall draw clear distinc. tion between capital expenditures and revenue expenditures . All expenditures incurred for the increase of fixed assets and intangible assets are capital expenditures . All expeaditures incurred to obtain current revenue are revenue expenditures .

　Article 19 Accounting methods adopted by a joint venture shall be consislent from one period to the other and shall not be attbitrarily changed . Changes, if any, shall be approved by the board of directors and submitted to the local tax authority for examination . Disclosure of the changes shall be made in the .accounting report .

Chapter IV Accounting for Paid-in Capitol

　Article 20 The participants of a joint venture shall contribute their share capital in the araount, ratio and mode of capital contribution within the stipulated time limit as provided in the joint venture contract . The accounting for paid-irt capital by a joint venture shall be based on the actual amount contributed by each Of its participants .

　(1) For investment made in cash , the amount and date as received or as deposited into the Bank of China Or Otner DanKS Vilnere tne Joint venture has opened its bank account shall be the basis for recording .the capital contribution . The foreign curreacy contributed by a foreign participantt shall be converted into Renminbi or further converted into a predetermine( I foreign currency at the exchange rates quoled on the day of the casb payment by the State Administration of Foreign . Exchange Control . of the People's Republic of China (hereinafter referred to as the State Administration of Foreign Exchange - Control) . Shnuld the cash Renminbi contributed by a Chinesc participant be converted into foreign currency , it shall be converted at the exchange fate quoted by the State Administration of Foreign Exchange Control on the day of the cash payment .

　(2) For investment in the form of buildings, machinery, equipmeht, materials .nd supplies, the amount shown on the examiried and verified itemiz.tion list of the assets as agreed upon by each p .rticipant according to the joint venture contr.ct .t.d the date of the receipt of the assets shall be the basis of accounting .

　(3) For investment in the form of ini. ngible assets, i. e. , proprietory technology , patents , trademarks, copyrights and other franchises , etc . , the amount aad date as provided in the agreement or contract shall be the basis of ac.ounting .

　(4) For investment in the form ot. the rigbt to use sites, the amount and date as provided in tbe agreement or contract shall be the basis of accountiag .
　The capital contributed by eacb participant shall be recorded into tthe accounts of the juint venture as soon as received .

　Article 21 The capital a.tount contributed by the participants of a joint venture shall be verified by Certified Public Account. nts registered with the government of the People , s Republic of China, who shall render a certificate on capital verification , which shall then be taken by the joint venture as the basis to issue capital coatribution certificates to the participants。

Chapter V Accouotiog for Cash and
Culfrent Accounts

　Article 22 A joint veature shall open its deposit accouats in the Bank of China within the, territory of the People's Republic of China or the other banks approved by the State Administratioo of Foreign Exchange Control or by one of its branches . All foreign exchange receipts must be deposited with the bank in the foreign currency deposit accounts and all foreign exchange disbursements must be made from tbe accounts .

　Articl. 23 A joint venture shall set up journals to itemize cash and bank transactions in chronological order A separate journal shall be set up for each currency if there are several Currencies .

　Article 24 The accounts receivable , accounts pavable and other receivables and payabls of a joint venture shall be recorded in separate accounts set up for different currencies . Receivables shall be collected and payables shall be paid in due time and shall be confirmed with the relevant parties periodically . The causes of uncollectible items shall be investigated and the responsibilities thereof shall be determined . Any item proved to be definitely uncollectible through strict management review shall be Written off as bad debts after approval is obtained through reporting procedures specified by the board of directors . No "reserve for bad debts" shall be accrued .

　Article 25 ln a joint venture using Renminbi as its bookkeeping base currency , its foreign currency deposits, foreign currency loans and other accounts denominated it. any foreign currency shall be recorded not only in the original foreign currency of the actual receipts and payments,but also in Reminbi converted from forei. gn currGncy at an ascertained exchange rate ( as certained according to . the exchange . ..rate quoted by the State Ad. inistration of FOreign Exchange Controt)

All additions of foreign currency deposits , foreign currency loans and other accouats denominated in foreign currencies shall be recorded in Renminbi converted at their recording exchange rates . While deductions shall be recorded in Renminbi converted at their book exchange rates . Differences in the Renminbi amount resulting from the conversion at diffrent exchange rates shall be recognized as " foreign exchange gains or losses " ( hereinafter referred to as " exchange gains or losses. ) and included in the current income .

The recoitding exchange rate for the conversioe. of foreign currencv to Renminbi may be the raie pre vaiiing o. the day of the transaction or on the first day of the monih , etc . The book exchange rate may be calcuiated by the first-in first-out mGthod , or by the weighted average meihod , etc . However, for the decrease of accounts denominated in a foreign curiiency, the origirtal recording rate may be used as the book rate . Whichever rate is adopted , there shall be no arbitrary ch.tnge once it is decided . lf any change is necessacy, it must be approved by the board of directors and dis. tlosed in the .ccounting report .

　　The differences in Renminbi resulting from the exchange transactiqns of different currencies shall also be recognized as exchange gains or losses .
The exchange gains or losses recognized in the account shall be the realized amounts . ln case of exchange rate fluctua.ion , the Renminbi balances of the foreign currency accounts shall not be adjusted .

　Article 26 ln a joint venture using a foreign currency as its bookkeepi.ng base currency , its Renminbi deposits, Renminbi ioans and other a.counts denominated in Renminbi shall be recorded not only in Renminbi but also in the foreign currency converted at the exGhange rate .dopted by .the enterprise . Differences in the foreign currency amount resulting from the - conve.sion shall also be recognized as exchange gains or losses as stipulated in Article 25 .

　　A joint venture using a foreign currency as its bookkeelping base currency shall compile not only annual accounting statetments in the foreign currency but also separate ,accounting statements in Renminbi translated from the foreign currency at the end of a year . However, the joint venture , s. Renminbi l)ank deposits , Renminbi bank loans and the other accounts denomiruted in Renminbi shall still . be accoUnted for in their original Renminbi amounts, and be c0mbined with . he other accounts converted into Renminbi from the foreign currency . The differences between the original Renminbi amounts of the Renminbi items and their Renminbi amounts fron. currency translation shall not be recognized as foreign exchange gains or losses , but shall be shown on tbe balance sheet. with an additional caption as . currency translation difTerences . . .

Chapter VI Accounting for lnventories

　Article 27 The inventories of a joint veJtture refer to merchandise , materials and supplies , containers , loW- value and perishable articles , work in process , semi-finisbed goods , finished goods , etc . , in stock , in processlng Or ln translt .

　Article 28 All tbe inveat9ries of a joint venture shail be recorded at the actual cost .
　　(1) The actual cost of raaterials and supplies , containers and low-value and perishable articles purchased from outside , shall include the purchase price, transportation expenses, loading and unloading cbarges , packaging expenses , insurance preraiuna , reasonable loss during transit , selecting and sortiag expenses before taken into storage , etc . Tbe cost of imported goods shall further include the custom duties and iadustrial and commercial consolidated tax, etc . For merchandise purchased by a coraraercial or service type enterprise the original purcbase price shall be taken as the actual cost for bookkeeping .
　　(2) The actual cost of self manufactured materials and supplies, containers , low-value and perishable articles, semi- finished goods and finished goods. shall include the materials and supplies consurned wages and relevant expenses incurred during the manufacture process .
　　(3) The actual cost of materials and supplies, containers , low -value and perishable articles, semi- finished and finished goods completed through outside processing shall include the original cost of the materials and supplies or semi-finished goods consumed , the processing expenses , inward and outward transportation expenses and sundry charges.
The merchandise of the commercial or service type enterprises processed under contract with outside units shall be recorded at the purchase price after processing, including the original purchase price of the merchandise before processing, processing expenses and the industrial and commercial consolidated tax attribulable .

　Article 29 The receipt , issuance, requisition and returt of the inventories of a joint venture shall be timely processed through accounting procedures according to the actual quantity and shall be itemized in the subsidiary ledger accounts with established columns for quantity and amount, so as to strengthen the inventory control The merchandise, materials, etc .in transit, shall be accounted for through subsidiary ledgers and their condition of arrival shall be inspected at all times For those goods not arrived in due time, the relevant department shall be urged to take action . As to those goods that have arrived but not yet been checked or taken into storage , their acceptance ,test and warebousiag proced-ures shall be carried Out in a timely manner . .
 
　Article 30 Tbe actual cost or original purchase price of i .ventories . issued or requisitioned from the store of a .joint venture ntay be accounted for by it under one of tbe following metbods : first -in first-out , moving average , weighted average , specitic ideatification, etc . Once the accounting method is adopted , nuarbitrary change shall be allowed . In case a change of accounting metbod is necessary , it shall be submitted to the local tax authority for approval and disclosed in the accounting report .

　Article 31 ln the joint ventures using planned cost in daily accounting for materials and supplies, finished goods, etc . , the planned cost of those issued from stock , shall be adjusted into actual cost at the end Of each month .
For the commercial and service type enterprises using selling price in daily accounting for merchandise, the cost of goods sold sball be adjusted from selUng price to original purchase price at the end of a month .

　Article 32 A joint venture shall take physical inventory of its stock periodically , at least once a year. lf any ove.age, shortage, damage, deterioration, etc . , is found , the relevant department shall i.vestigate the cause and write out a report . Accounting treatment shall be made as soon as the report is approved through strict managetnent review and the reporting procedures specified by the board of drectors . The treatment shall generally be conapleted before the annual closing of the final accounts .
　(1) The inventory shortage ( minus inventor overage) and damage (minus saivage) of maictrials arid supplies, work in process, se. ti -finished goods ,fnished goods , azad merchandise, etc . , shall be charged to the current expenses, except the amount . itl any , that should be indemnified by the persons in fault .
　(2) The net loss resulting from naturial disasters shall be charged to non- operating expenses after deducting the salvage value recoverable and insurance indemnity .

　Article 33 lf there is any inventory in . joint venture to be disposed of at a reduced price due to obsolescence, it shall be . reported for. approval according to tlie procedures specified by the board of directors , and the net loss on disposal shall be recognized as loss on sales . lf th. disposal is not yet done before the annual closing of ihe final accounts, disclosure shall be made in the annual accounting report for the actual cost per book , the net r. alizable value and the probable loss thereof.

　Article 34 Disciosure shall be made in the annual accounting report of a joint venture on the actual cost per book, net realizable value and probable loss of its inventories of which the net realizable value is lower than the actual cost per book due to the decline of the market price .

Chapter VII . Accounting for Long-term
lnvestment and Long-term Liab ilities

　Article 35 The investment of a joint venturG in other units shall be accounted for at the amount paid or agreed upon at the time of the investment, and shall be shown on the balance sheet with a separate caption as " Iong-term investment lncome and l6ss derived from long- term investments shall be recognized as non-operating lncome Or non-Operatlng expense .

　Artick 36 The bank loans borrowed by a joint venture for capital construction during its preparation period or for increasing fixed assets , expanding its business. or making renovation and reform of its equipment after its operation started , shall be accounted for at the amount and on the date of the ioan and sball be presented , in the balance sheet with a separate .caption as . long-term bank Joans".
　　The interest expenses on the long- term bank loans inclurred during .the construction period shall be charged to, construction c0st and capi talized as a parf of the original cost of the fixedl assets: but interest expenses incurrcd after the , completi on of the construction and the transfer of fixed assets for opetiation pturpose shall be charged to current expenses ..

Chapter VIII Accountinlg for Fixed Assets

　Article 37 A joint venture shall prepaite a fiixed assets catalogue as the b.sis of accounting according to the criteria of fixed .ssetts iaid down in " The lncome Tax Law Concerning J oint Ventures with Chinese and Foreign lnvestment " and in consideration of its specific circumstances .

　Article 38 The fixed assets of a joint vcnture shall be grouped into five broad ca. etiories as follows: buiiding and structuresimachinery and equipment electironic equipment: transport facilities (trains or ships, if any , shall be grouped separately) : and other equipmeat . The joint venture may further group them into sub-categotties according to the needs of its management .

　Article 39 The. fixed assets of a joint venture shail be recorded at their original cost .
　　For fixed assets contributed as investment , the. original cost shall be the price of the assets . agreed upon by all the pariicipants of the joint venture at the time of investment。
　　For fixed assets purchatted , the original cost shall he the total of the purch.se price plus freight, loading and unloading charges , packaging expenses .nd insurance premium, etc . The original cost of the fixed assets that need installation work, shall include installation expenses . The original cost of imported equipment shall further include tbe custoaa duties , iadustrial and comzaercial consolidated tax , etc . t paid as required . , . For , fixed assets manufactured or constructed by the joint veqture itself: the origiaal coat shall be the actual expenditures incurred . in tbe course of manufacture or Constructlon。
Expenditures of a joint veoture oa tecbnical inaovation, aod reform that result in the increase of tbe fixed assets , value sball be recorded as incremeats of the origiaal cost of tbe fixed assets .

　Arhcle 40 Depreciation oa tbe fixed assets of a joint venture shall geaerally be accounted for on an average basis under the straight line method .
　(1) Depreciation on fixed assets shall be accounted for on the basis of tbe origiaal cost and the group depreciation rate of tbe fixed assets .
　　Depreciation rate of the fixed assets shall be calcuated and determined on the basis of the original cost,estimated residual value and the useful Ufe of the fixed assets .
　　A joint venture shall detenmine the specific useful lives and depreciation rates for differeat groups of taxed assets according to the mioimum depreciation period anrd the estimated residual value of tbe fixed assets as provided in .Tbe lncome Tax Law Cohcerning J oint Ventures Witb Cbinese and Foreign vestment . ..
　(2) ln case a joint venture needs accelerated depreciatioa or change of depreciation zaethod for special reasons , appUcatioa sbaU be submitted by the joint venture to the tax authority for examinatioa and approval .
　(3) Generally , depreciation of tbe fixed assets of a joint venture shall be acGounted for monthly . according to the monthly depreciation rates and the monthly beginning balances of tbe original cost per book of the fixed assets in use . For fixed assets put io use during a month, depreciation shall not be calculated for the montb but shall be started from the next month . For fixed assets reduced or stopped to be used , during the month depreciation shall still be ealculated for the month and be stopped from the next month.
　(4) For the fixed assets fully depreciated but still useful , depreciation shall no longer be calculated For the fixed assets discarded in advance , no retroactive depreciation shall be made either .
　For the fixed assets declared scrap in advance or transferred out , the difference between the net proceeds obtained . from disposal ( less liquidation expenses) and the net value of the fixed assets (original cost less accumulate depreciation) shall be recognized as non -operating income or non-operating extpenses of a joint venture .

　Article 41 For tbe purchase , sales, disposal , discarding and internal transfer, etc . , of the fixed assets , a joint venture must execute accounting routines and set up fixed assets subsidiary ledger for the relevant accounting so as to strengthen the control of fixed assets .

　Article 42 Physical inventory must be taken of the fixed assets of a joint venture at least once a year .If any overage, shortage or damage of the fixed assets is found , the cause shall be investigated and a report be written out by the relcvant department . Accounting treatment shall be made as sOon as the report is approved through strict taanagement review and tbe reporting procedures specified by the board of directors . Generally ,. this work shall be fiaished before the annual closing of the final accounts .
　(1) For fixed assets overage, the replacement cost shall be taken as the original cost the accumulated depreciation shall be estimaied and recorded according tio the existing u.sability and wear and tear of the assets. and the difYerence between the original cost and the accuraulated depreciation shall be credited to non-operating income .
　(2) For - fixed assets shortage , the original cost and accumulated depreciation shall be written off and the. excess of origiaal cost over accumulated depreciation shall be charged as nonoperating expenses .
　(3) For damaged fixed assets , the net loss after the original cost deducted by tbe accumulated ,depreciation , recoverable salvage value and the indemaity receivable from tbe persons in fault or from , the insurance company , shall. be charged as non-operating expenses . .

Chapter IX AccouDting for lntangible Assets
and Other Assets

　Article 43 The intangible assets and other assets of a joint venture includet proprietary technology , patents , trademarks, copyrigihts , right to use sites , other franchises and organization expenses , etc .
For intangible assets contributed as investment by the participants of a joint venture , the original cost shall be the valuie provided in the agreement or contract . The original cost of purtchased intangible assets shall be the amourout actually paid . Monthly. amortization of an intangibie asset shall be made over its useful life from the year when it come into use . The one without specified useful life may be amortized over ten years . The amortization period shall not be longer that the duration of a joint venture .

　Article 44 The expenses incurred by a joint Venture during its preparation period ( not including expenditures for acquiring fixed assets and intangible assets and the interest incurred during the construction period to be inclded in the construction cost) may be accounted for as organization expernses according to the provision of the agreement and with the consent of all participants , and shall be amortized after the production or operation starts . The annual amortization shall not exceed . 20 percent of the expenses .

　Article 45 The expenditures incurred by a joinl venture on major repair and improvement of the- fixed assets held uRder lease shall be anlortized over the period benefited fr0m such expenditures . However, the amortization period shall not be, longer than the lease term of the fixed assets.