Revenue Recognition about “Chinese Accounting Standards for SMEs”

Abstract

　This paper discusses the bookkeeping methods with the intention to generalize characteristics in terms of revenue recognition about Chinese Accounting Standards for Small and Medium-Size Enterprises (SMEs) . In 2011, the Chinese Ministry of Finance issued Accounting Standard for SMEs to regulate issues in terms of recognition, measurement and reporting for small and medium-size business enterprises. The Accounting Standard for SMEs provides recognition criteria and measurement methods for revenues earned from the sale of goods contracts or service contracts. In effect, revenues earned from the sale of goods contracts are not recognized on the criteria of significant risk transfer and ownership reward. Rather, specific criteria in revenue recognition are provided. Revenues earned from service contracts are recognized in two ways. For service contracts started and finished in the same fiscal year, revenues are recognized when the service has been rendered, payment has been received or right to receive payment has been acquired. For service contracts started and finished in different fiscal years, revenues are recognized using the percentage of completion method. For contracts that include both sale of goods and services, revenues earned from the sale of goods and service contracts are separated and measured individually.