ASBE No. 38
Active
Initial Implementation of Accounting Standards for Enterprises
Initial Implementation of Accounting Standards for Enterprises is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
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Conceptual Framework Linkage
China's own dedicated "first-time adoption" standard
ASBE No. 38 governs HOW an ENTERPRISE prepares ITS OPENING Balance SHEET and TRANSITIONS to the ASBE FRAMEWORK for the FIRST time – a ROLE CONCEPTUALLY paralleling IFRS 1 (FIRST-time Adoption of INTERNATIONAL Financial REPORTING Standards) internationally, THOUGH originally FRAMED around China'S OWN 2006 nationwide TRANSITION to the OVERHAULED ASBE FRAMEWORK.
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Scope – the 2006 Transition, and Ongoing New Adopters
Both the historic nationwide rollout and later individual adopters
This Standard ORIGINALLY addressed the NATIONWIDE transition of Chinese ENTERPRISES to the OVERHAULED 2006 ASBE FRAMEWORK, but ALSO continues to APPLY to any INDIVIDUAL enterprise ADOPTING ASBE for the FIRST time SUBSEQUENTLY (e.g. a COMPANY previously applying a SIMPLIFIED framework, such as the ACCOUNTING Standards for SMALL Business ENTERPRISES, transitioning UP to full ASBE).
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The General Principle – Retrospective Application, With Exceptions
As if ASBE had always been applied, subject to specific relief
AS a GENERAL principle, an ENTERPRISE APPLIES the ASBE FRAMEWORK RETROSPECTIVELY in ITS opening BALANCE sheet, AS IF ASBE had ALWAYS been APPLIED – SUBJECT to SPECIFIC mandatory EXCEPTIONS and OPTIONAL exemptions (Sections 4 and 5) RECOGNISING that FULL retrospective APPLICATION would, in CERTAIN areas, be EITHER impracticable OR disproportionately COSTLY.
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Mandatory Exceptions to Retrospective Application
Areas where retrospective application is prohibited
CERTAIN areas are SPECIFICALLY EXCLUDED from retrospective APPLICATION – MOST notably, PRIOR DERECOGNITION decisions for FINANCIAL assets and LIABILITIES are GENERALLY NOT reopened, and HEDGE accounting RELATIONSHIPS are NOT retrospectively DESIGNATED – REFLECTING that REVISITING such HISTORICAL determinations WITH the BENEFIT of hindsight WOULD undermine the RELIABILITY of the TRANSITION exercise.
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Optional Exemptions
Practical relief an enterprise may elect to apply
AN enterprise MAY ELECT certain PRACTICAL exemptions – MOST notably, NOT restating PAST business COMBINATIONS that OCCURRED before the TRANSITION date (RETAINING the PREVIOUS carrying AMOUNTS of goodwill and ACQUIRED assets/LIABILITIES, RATHER than RECALCULATING them under the FULL ASBE No. 20 acquisition METHOD) – a PRACTICAL relief RECOGNISING the DISPROPORTIONATE cost of RECONSTRUCTING historical ACQUISITION accounting.
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The Opening Balance Sheet
The starting point for the new accounting framework
AN enterprise PREPARES an OPENING Balance SHEET at the DATE of TRANSITION – RECOGNISING all ASSETS and LIABILITIES ASBE requires, DERECOGNISING those it does NOT permit, RECLASSIFYING items AS necessary, and MEASURING all RECOGNISED assets and LIABILITIES in ACCORDANCE with ASBE.
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Reconciliations Required on Transition
Bridging the old framework to the new
AN enterprise ADOPTING ASBE for the FIRST time DISCLOSES a RECONCILIATION of ITS equity and PROFIT or loss UNDER the PREVIOUS framework to THOSE same figures UNDER ASBE, HELPING readers UNDERSTAND the FINANCIAL statement IMPACT of the TRANSITION.
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Worked Example – Adjusting Retained Earnings on Transition
Recognising a previously unrecognised deferred tax asset
Example: Recognising deferred tax for the first time
A company transitioning to ASBE previously applied a framework with no deferred tax recognition (the old "tax payable method" – see the companion ASBE No. 18 poster). On transition, it identifies a deductible temporary difference giving rise to a RMB 4,000,000 deferred tax asset.
The company RECOGNISES the RMB 4,000,000 deferred TAX asset in ITS OPENING Balance SHEET, WITH a CORRESPONDING adjustment INCREASING opening RETAINED earnings by RMB 4,000,000.
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Worked Example – Applying a Business Combination Exemption
Retaining previous carrying amounts rather than restating
Example: Not restating a pre-transition acquisition
A company acquired a subsidiary five years before its ASBE transition date, recognising goodwill under its previous framework's own (different) measurement approach.
The company ELECTS the business COMBINATION exemption, RETAINING the PREVIOUS carrying AMOUNT of goodwill AS its OPENING ASBE balance, RATHER than RECALCULATING the ACQUISITION under ASBE No. 20's CURRENT acquisition METHOD.
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Disclosure Requirements
What ASBE No. 38 requires
Reconciliation of equity and profit or loss from the previous framework to ASBENature of any exemptions elected on transitionExplanation of material adjustments made to the opening Balance Sheet
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Which optional exemptions to elect on transition
SIGNIFICANT ESTIMATES
Estimates used in the opening Balance Sheet must be consistent with estimates made at that date under the previous framework, adjusted only for accounting policy differences
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Relationship to IFRS 1
Comparison – ASBE 38 vs IFRS 1
FeatureASBE 38IFRS 1
General retrospective principleYES, with exceptions/exemptionsYES, with exceptions/exemptions – converged
Business combination exemptionAvailableAvailable – converged
A GENUINELY conceptually PARALLEL standard, THOUGH originally FRAMED around China'S OWN specific 2006 TRANSITION context RATHER than a GENERIC, ongoing FIRST-time adoption SCENARIO.
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Statement Mapping
Where every transition adjustment lands
EventStatement(s) affectedNotes
Opening Balance Sheet adjustmentBS SCOETypically adjusted through opening retained earnings
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Related Standards
Cross-reference map
StandardConnection
ASBE No. 20Business Combinations – the standard this Standard's optional business combination exemption relates to
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Quick-Reference Glossary
Date of transition
The beginning of the earliest period for which an enterprise presents full comparative information under ASBE for the first time.
Opening Balance Sheet
The Balance Sheet prepared at the date of transition, forming the starting point for reporting under the new accounting framework.
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. 38 Initial Implementation of Accounting Standards for Enterprises issued
Operative for periods beginning on or after 1 February 2007