ASBE No. 23
Active
Transfer of Financial Assets
Transfer of Financial Assets is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
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Conceptual Framework Linkage
Determining when a financial asset should come off the Balance Sheet
ASBE No. 23 governs the DERECOGNITION of FINANCIAL assets – DETERMINING WHEN a TRANSFERRED financial ASSET should be REMOVED from the TRANSFEROR'S Balance SHEET, RATHER than CONTINUING to be RECOGNISED (WHOLLY or PARTIALLY). This STANDARD works ALONGSIDE ASBE No. 22 (CLASSIFICATION and measurement) to FORM the COMPLETE financial ASSET accounting FRAMEWORK, CLOSELY converged with IFRS 9'S own DERECOGNITION model internationally.
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Scope
Sales, factoring, securitisation, and similar transfer arrangements
This Standard applies to TRANSACTIONS in WHICH an ENTERPRISE TRANSFERS a FINANCIAL asset (or a PART of one) to ANOTHER party – COVERING outright SALES, FACTORING of RECEIVABLES, SECURITISATION arrangements, and REPURCHASE (repo) TRANSACTIONS.
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Full Derecognition – Risks and Rewards Substantially Transferred
The primary test for derecognition
WHERE an ENTERPRISE TRANSFERS SUBSTANTIALLY ALL the RISKS and REWARDS of OWNERSHIP of a FINANCIAL asset, the ASSET is DERECOGNISED IN FULL, WITH the DIFFERENCE between the CARRYING amount and the CONSIDERATION received RECOGNISED as a GAIN or LOSS.
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Continued Recognition – Risks and Rewards Substantially Retained
No derecognition, a corresponding liability instead
WHERE an ENTERPRISE RETAINS SUBSTANTIALLY ALL the RISKS and REWARDS of OWNERSHIP (e.g. a SALE with a REPURCHASE agreement at a FIXED price), the ASSET CONTINUES to be RECOGNISED IN FULL, WITH the CONSIDERATION received RECOGNISED as a FINANCIAL liability, RATHER than a SALE.
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The Control Test – the Fallback for Ambiguous Cases
Applied where risks and rewards are neither clearly transferred nor retained
WHERE it is NOT clear WHETHER SUBSTANTIALLY all RISKS and REWARDS have been TRANSFERRED or RETAINED, the ENTERPRISE assesses WHETHER it has RETAINED CONTROL of the ASSET – IF control is RETAINED, the ASSET continues to be RECOGNISED to the EXTENT of the ENTERPRISE'S continuing INVOLVEMENT (Section 6); IF control PASSES to the TRANSFEREE, the ASSET is DERECOGNISED.
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Continuing Involvement Accounting
Recognising an asset and liability limited to the retained exposure
WHERE the ENTERPRISE retains a LIMITED, ONGOING exposure to the TRANSFERRED asset (e.g. a GUARANTEE, or a RETAINED subordinated INTEREST), it CONTINUES to RECOGNISE the ASSET (and a CORRESPONDING liability) ONLY to the EXTENT of its CONTINUING involvement – RATHER than either FULL derecognition or FULL continued RECOGNITION.
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Common Practical Examples
Recurring transfer arrangements in Chinese practice
Factoring of trade receivables (with or without recourse)Asset securitisation (bundling receivables into tradable securities)Repurchase (repo) agreementsDiscounting of notes receivable
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Worked Example – a Factoring Arrangement Qualifying for Derecognition
A genuine, non-recourse sale of receivables
Example: Non-recourse factoring of trade receivables
A company factors RMB 50,000,000 of trade receivables to a bank on a genuinely NON-RECOURSE basis, receiving RMB 47,000,000 cash, with the bank bearing all credit risk and no ongoing involvement retained by the company.
Since SUBSTANTIALLY all RISKS and REWARDS are TRANSFERRED, the company DERECOGNISES the RMB 50,000,000 receivable IN FULL, recognising a LOSS on transfer of RMB 50,000,000 − RMB 47,000,000 = RMB 3,000,000.
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Worked Example – Continuing Involvement Under a Retained Guarantee
Partial derecognition, limited to the retained exposure
Example: Factoring with a partial credit guarantee
A company factors RMB 30,000,000 of receivables, but retains a guarantee covering the first RMB 3,000,000 of any credit losses (its maximum possible exposure).
The company CONTINUES to recognise an ASSET (and a CORRESPONDING liability) of RMB 3,000,000 – LIMITED to its CONTINUING involvement – DERECOGNISING the REMAINING RMB 27,000,000 of receivables, since it has NO further EXPOSURE beyond the GUARANTEE.
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Disclosure Requirements
What ASBE No. 23 requires
Nature and carrying amount of transferred financial assets not qualifying for full derecognitionNature and extent of any continuing involvement retainedGain or loss recognised on transfers qualifying for full derecognition
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether substantially all risks and rewards have been transferred, retained, or sharedWhether control has passed where the risks-and-rewards test is inconclusive
SIGNIFICANT ESTIMATES
Fair value of any retained continuing involvement asset or liability
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Relationship to IFRS 9
Comparison – ASBE 23 vs IFRS 9's derecognition provisions
FeatureASBE 23IFRS 9
Risks-and-rewards primary testYESYES – converged
Control test fallbackYESYES – converged
A GENUINELY thoroughly CONVERGED standard – the DERECOGNITION logic MIRRORS IFRS 9'S own APPROACH closely.
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Statement Mapping
Where every transfer event lands
EventStatement(s) affectedNotes
Full derecognitionBS ISGain/loss recognised on transfer
Continuing involvementBSAsset and liability limited to the retained exposure
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Related Standards
Cross-reference map
StandardConnection
ASBE No. 22Recognition and Measurement of Financial Instruments – supplies the classification framework this Standard's derecognition provisions apply to
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Quick-Reference Glossary
Derecognition
The removal of a previously recognised financial asset from an entity's Balance Sheet.
Continuing involvement
A retained exposure to a transferred financial asset (such as a guarantee), requiring partial continued recognition limited to that exposure.
Financial statement key (Chinese GAAP / ASBE terminology)
BS Balance Sheet (资产负债表)
IS Income Statement (利润表)
SCOE Statement of Changes in Owners' Equity (所有者权益变动表)
CFS Cash Flow Statement (现金流量表)
History & Development
2006-02
ASBE No. 23 Transfer of Financial Assets issued
Operative for periods beginning on or after 1 February 2007