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Q:
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For accounting purposes, what are the principles for recognizing the new revenue standard in the 2017 version?
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A:
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In accordance with the criteria for judgement under the new revenue standard, the principles are as follows.
The parties have approved the contract and have undertaken to perform their respective obligations.
The contract specifies the rights and obligations of the parties to the contract with respect to the goods transferred or the services provided (hereinafter referred to as "the transferred goods").
The contract has express payment terms relating to the goods transferred.
The contract has commercial substance, i.e. performance of the contract will change the risk, timing or amount of the enterprise's future cash flows.
The enterprise is likely to recover the consideration to which it is entitled by virtue of the transfer of the goods to the customer.
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Q:
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Receipts are invoiced, so what is its impact on VAT?
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A:
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For VAT, according to the relevant tax regulations, revenue is recognized as soon as an invoice is issued.
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Q:
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Receipts are invoiced, so what is its impact on corporate income tax?
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A:
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Revenue from the sale of goods by an enterprise is recognized when it meets the following criteria, irrespective of whether an invoice is issued.
A contract for the sale of goods has been concluded and the enterprise has transferred to the purchaser the principal risks and rewards associated with ownership of the goods.
The enterprise has neither retained the right of continued management, normally associated with ownership, nor exercised effective control over the goods sold.
The amount of revenue can be measured reliably.
Costs incurred or to be incurred on the seller's side can be reliably accounted for.
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Q:
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For now, what are the special revenue recognition categories?
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A:
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Confirmation in instalments, including:
the mode of payment in instalments, which is specifically confirmed on the date of payment as agreed in the contract;
the longer construction period, which normally lasts for more than 12 months, which is confirmed according to the amount of work done in the tax year in which the completion of design or the completion of the work has taken place.
Contractual time receipts.
Rental income, according to the contractual date of the lessee's rent payable to recognize the realization of income, etc.
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Q:
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What if the amount of the revenue which recognized in the accounting booked doesn't match the VAT declared income?
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A:
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The principle of recognition of income for corporate income tax is basically the same as that for accounting purposes, but it may differ from the income reported for VAT tax purposes.
If a discrepancy occurs, it is sufficient if the business is real and the amount is accurately recognized and supported by relevant documents, including invoices, freight, and acceptance.
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