On Apr. 25, CHI SAC revised guide to improve quality of accounting.
CHI SAC revised Guidelines for valuation of financial instruments by securities companies, the Guidelines for valuation of equity interests in non-listed companies, and the Guidelines for impairment of financial instruments by securities companies.
To improve the quality of accounting information in securities industry, standardize accounting treatment of financial instruments, guide valuation, impairment practices.
Valuation of Financial Instruments
Revises valuation methods for fixed-income instruments, introduces new approaches for illiquid and distressed bonds based on cash flow discounting and debt structure.
Refines valuation of locked-up unlisted shares with liquidity discounts, and specifies penetration valuation for products when fund manager data is unreliable.
Valuation methods for inactive exchange-traded, OTC derivatives are detailed, outdated methods removed, self-regulation measures added to prevent manipulation.
Valuation of Equity Interests
Emphasis on substance over form principle; consistent valuation techniques required.
Securities companies must conduct valuations semi-annually, timely update data.
Valuation techniques are clarified, specifying methods for mature, underperforming, or liquidating companies and setting rules for key parameter selection.
New techniques such as repurchase price method are introduced; practical case studies are expanded to guide selection of valuation techniques, parameter setting.
Impairment of Financial Instruments
Internal controls for impairment assessments are strengthened; securities companies must apply prudence, comprehensiveness, foresight in estimating credit losses.
Single and collective assessment methods for credit loss estimation are clarified, with requirements to update forward-looking information annually or upon major events.
Criteria for credit risk stage classification are detailed to ensure consistency, prevent risk underestimation; new standards for impaired asset write-offs are established.
Self-regulatory measures are introduced to monitor prudence and effectiveness of impairment work, prevent manipulation of financial result by impairment adjustments.
Effectiveness
Revised guidelines will be officially implemented starting from Jun. 1, 2025.
Regulators
CHI SAC
Entity Types
Auditor; B/D; Corp; OTC
Reference
RN SAC No. 86 (2025), 4/25/2025
Functions
Accounting; Actuarial and Valuation; Compliance; Financial; Reporting; Risk
