01. Yunxin and its operating model
What are the relevant dispute points for handling the accounting treatment of Yunxin business, and can it be recorded in accounts receivable? Yunxin is the corporate credit circulating on the platform of China Enterprise Cloud Chain. Some large enterprise groups with high-quality credit can transform their underutilized high-quality corporate credit into a new type of financial service that can be circulated, financed and flexibly configured through the CE Cloud Chain platform, and provide a new type of creditor's rights and debt settlement tool for small and medium-sized enterprises with serious credit sales and capital turnover difficulties in the upstream and downstream of the industrial chain.
What are the relevant dispute points for the accounting treatment of Yunxin business, and can they be recorded in accounts receivable?
On the cloud chain platform, the core enterprise uses the credit line of banks or other financial institutions, converts it into cloud credit line on the cloud chain platform, and issues cloud credit for the payment of accounts payable within the credit line. After receiving Yunxin, the sales enterprise can transfer it to the supplier, or apply for reverse factoring from the financial institution by splitting and refinancing, or it can choose to hold it at maturity, and the core enterprise will repay Yunxin, and the financial institution will liquidate and distribute it to each holder.
As a credit settlement method, Yunxin has four main characteristics:
(1) Detachable.
According to the agreement in the Agreement on the Use of Yunxin, Yunxin can be divided into equal shares, and the amount of claims corresponding to the face value of each share is 1 yuan.
(2) Transferable.
After registering on the CommsEase platform, the core enterprise can issue CommsChip to the supplier. After receiving Yunxin from the buyer for credit sales, small and medium-sized enterprises in the industrial chain can transfer the Yunxin held by them to their upstream suppliers to settle their payables. The circulation of Yunxin is based on the online cloud chain platform, and the platform does not charge any fees.
(3) Bankable.
Based on the real trade background, small and medium-sized enterprises in the industrial chain can realize the efficient financing of "T+0" instant lending on the cloud chain platform by factoring the Yunxin held by financial institutions or commercial factoring enterprises. After providing basic information such as supply contracts, invoices, and invoices, the financing is completed with the Yunxin held by Yunxin as the guarantee for the repayment of factoring financing. According to the benchmark interest rate determined by the core enterprise, the cloud chain platform intelligently judges the financing interest rate level according to the type and qualification of the Yunxin transferor.
What are the relevant dispute points for the accounting treatment of Yunxin business, and can they be recorded in accounts receivable?
(4) Flexible configuration.
Yunxin has a time limit, and small and medium-sized enterprises in the industrial chain can independently decide to transfer, finance or hold the Yunxin they receive through the cloud chain platform within the term of Yunxin according to the needs of business development. Therefore, in essence, Yunxin creates liquidity in the closed-loop of the supply chain platform by dividing, flowing and financing the credit of core enterprises, and facilitates the settlement of the creditor's rights and debts of the majority of enterprises in the chain through the circulation of Yunxin in the supply chain, which not only revitalizes the idle credit line of large enterprises, but also provides a new channel for convenient, efficient and low-cost financing for small and medium-sized enterprises.
02. Disputes related to Yunxin's accounting treatment
1. Credited to "Funds in Other Currencies".
With the rapid development of e-commerce and Internet finance, the business volume of enterprises handling payment settlement through third-party payment platforms is increasing, but at present, the accounting standard-setting institutions for enterprises in mainland China have not formulated relevant accounting treatment regulations for third-party payment business, so for third-party payment business, corporate accountants often carry out accounting treatment based on personal understanding and practical experience. For third-party payment and settlement methods such as Alipay and WeChat, which are widely used in practice, enterprises often set up detailed accounts under the account of "other monetary funds" for accounting.
For the Yunxin settlement method that has just emerged recently, because the enterprises on the platform can use the virtual payment circulation or refinancing, which can play a role in replacing the currency transaction function to a certain extent, some enterprises will treat it as a third-party payment business similar to Alipay and WeChat when they receive Yunxin issued by other enterprises, and also attribute it to the "other monetary funds" account for accounting.
2. Do not carry out accounting processing, only do registration for future reference.
Yunxin is an electronic payment commitment letter signed between CEChain and Yunxin, each unit of denomination is equivalent to 1 yuan, and the split and circulation of Yunxin in the supply chain is similar to a virtual currency trading system. According to this view, although Yunxin undertakes the transaction function of currency in the supply chain chain, it is not a real bank currency, so the enterprise does not do accounting processing when it receives Yunxin, but only registers for reference. Accounting processing will only be carried out when the Yunxin holding expires and the monetary funds are transferred from the bank account of the Yunxin issuer to the bank account of the Yunxin holder.
What are the relevant dispute points for the accounting treatment of Yunxin business, and can they be recorded in accounts receivable?
3. Credited to "notes receivable".
In essence, the cloud chain platform is a receivables circulation financing platform, and the cloud letter product launched by it is essentially an electronic payment commitment letter, which can be regarded as the "enterprise acceptance bill" launched by the cloud chain platform. In addition, Yunxin has the characteristics of split, transferable and financing, and has a clear maturity date, from the perspective of business characteristics, similar to the commercial paper discounting business backed by the credit of the core enterprise, so some enterprises will treat it as a bill when receiving the issued Yunxin and attribute it to the "notes receivable" account for accounting.
4. Credited to "Accounts Receivable".
As an Internet financial platform payment commitment letter, the format of Yunxin is not stipulated by the People's Bank of China, and its characteristics of split, negotiable and financeable conflict with the provisions of the Notes Law that do not allow partial endorsement or separate transfer, so in a legal sense, Yunxin is not within the scope of the bill regulations and should not be accounted for through the "notes receivable" account, so some enterprises attribute it to the "accounts receivable" account for accounting when they receive the issued Yunxin.
03. Suggestions and examples of accounting treatment for Yunxin accounting accounts
According to the Explanation of Accounting Standards for Business Enterprises (2010) prepared by the Accounting Department of the Ministry of Finance, other monetary funds are bank deposits for designated purposes. Although Yunxin can transfer and split, to a certain extent, it replaces the currency transaction function, but when the enterprise receives the Yunxin issued by other enterprises, the payment does not directly reach the company's bank account, but uses the cloud chain platform to circulate or refinance the virtual payment in the supply chain, if it is credited to the "other monetary funds" account, it is obviously inconsistent with the definition of other monetary funds.
According to the operation mode of CE Cloud Chain platform, after the enterprise registers on the cloud information platform, the core enterprise can issue cloud information to the supplier. Yunxin can not only circulate in the supply chain, penetrate the multi-level suppliers in the supply chain to achieve fast and multi-level circulation, but also carry out low-cost factoring financing through the platform.
This is not only the flow of the enterprise's right to collect, but also the transfer of the enterprise's credit. Therefore, Yunxin does not carry out accounting treatment, but only does the processing of record registration, ignoring the fact that Yunxin this new settlement method exists. In essence, Yunxin can be regarded as a credit-based receivable right, which should be recorded in "accounts receivable" or "notes receivable".
From the perspective of measurement attributes, accounts receivable can usually be classified as financial assets measured at amortized cost, but notes receivable, because enterprises often discount them, are managed as a business model that aims at both collecting contract cash flows and selling the financial assets, and should be classified as financial assets measured at fair value through other comprehensive income.
What are the relevant dispute points for the accounting treatment of Yunxin business, and can they be recorded in accounts receivable?
According to the new financial instrument standards, a simplified model is allowed to accrue credit impairment losses according to the amount of expected credit losses over the entire duration, while notes receivable face relatively little credit risk because they can be discounted, and do not need or can be used as a combination of high-quality credit records to make impairment provisions.
If the received cloud credit is recorded in "accounts receivable", the subsequent measurement will encounter many problems such as the selection of measurement attributes and the measurement of impairment losses.
There are two main differences between Yunxin and commercial acceptance bills:
(1) The supervision agency is different. Yunxin's supervising agency is the cloud chain platform, while the supervising agency of commercial acceptance bills is the bank.
(2) Whether it can be closed-loop circulation. Commercial acceptance bills cannot be managed in a closed-loop manner in the process of discounting and refinancing, but the Yunxin model is used for financing, and the closed-end capital operation is adopted, which makes it easier to control the cash flow.
In essence, the operation mode of Yunxin is equivalent to electronic commercial acceptance bills, and some large enterprises with good credit use bank credit support to convert their credit into Yunxin quota through the platform for transactions, and circulate between the upstream and downstream of the industrial chain or endorse and transfer in the supply chain. Due to the credit support of the bank and the closed-loop design, the credit risk of Yunxin is more similar to that of bank acceptance bills, and the credit risk is much lower than that of commercial acceptance bills. Therefore, according to the principle of substance over form, it is the best destination for Yunxin to record the received Yunxin into "notes receivable".
As an innovative service model of supply chain financial products, Yunxin's integrated financial services mainly include four sub-businesses: opening, circulation, financing and maturity repayment of Yunxin. After the core enterprise obtains the Yunxin quota allocated by a bank or other financial institution or group company, it can open Yunxin within the credit line for the payment of its own payables.
After receiving Yunxin from the core enterprise, other small and medium-sized enterprises in the supply chain can use it as a whole or split to pay the payable, so as to bring about the flow of Yunxin in the supply chain, or they can apply for reverse factoring from the platform cooperative bank or factoring company after the whole or split according to their business needs, that is, Yunxin's financing. After the maturity of Yunxin, the core enterprise will repay it when it is due, and the platform will divide the payment to each holder of Yunxin. This paper takes the opening, circulation, financing, and repayment of maturity of Yunxin as an example to analyze the accounting treatment of relevant accounting entities under the settlement method of Yunxin.
Example: Suppose Company A, Company B, and Company C are all members of CEChain Platform. Company A is the supplier of Company B, and Company C is the customer of Company B. On January 31, 20×1, Company B sold a batch of goods on credit to Company C, with a total payment of 10 million yuan and taxes, and the payment period agreed by the two parties was 90 days. On May 1, 20×1, due to financial constraints, Company C opened a 3-month Yunxin for payment after negotiation and agreement with Company B. On June 1, 20×1, Company B split the Yunxin held by Company B and paid 6 million yuan to Company A to pay off the amount due to Company A;
What are the relevant dispute points for the accounting treatment of Yunxin business, and can they be recorded in accounts receivable?
On May 1, 20×1, when Company B received the Yunxin issued by Company C on the platform, it debited "notes receivable - Yunxin" of 10 million yuan and credited "accounts receivable - Company C" of 10 million yuan. When Company C opened Yunxin on the platform, it debit "Accounts Payable - Company B" 10 million yuan and credited "Notes Payable - Yunxin" 10 million yuan.
On June 1, 20×1, when Company B used Yunxin to pay its debts, it debit "Accounts Payable - Company A" 6 million yuan and credited "Notes Receivable - Yunxin" 6 million yuan. When Company A received Yunxin for debt repayment, it debited "Notes Receivable - Yunxin" for 6 million yuan and credited "Accounts Receivable - Company B" for 6 million yuan. Since the circulation of Yunxin on the platform does not need to pay any fees, this entry does not involve other accounts. On the same day, when Company B applied for factoring with Bank D for realisation of RMB 4 million as a guarantee for financing repayment, since Yunxin Financing was a non-recourse factoring business, it could be considered that the transfer of the financial assets met the conditions for derecognition, so when Company B received the financing money, it debited RMB 3.99 million in "bank deposits" and RMB 10,000 in "financial expenses", and credited RMB 4 million in "notes receivable - Yunxin".
On August 1, 20×1, when Yunxin expired, on the day when Yunxin promised to pay, the platform system automatically deducted the repayment funds from the balance of the general settlement account of Yunxin opening party C company, and transferred the funds to the general settlement account of Yunxin holder, and the platform did not charge any fees. When receiving the funds, the holding company of Yunxin, Fang A, debited the "bank deposit" of 6 million yuan, credited the "notes receivable - Yunxin" 6 million yuan, and the holding of Yunxin, Fang Ding Bank, debit the "bank deposit" of 4 million yuan and credited the "notes receivable - Yunxin" 4 million yuan when receiving the funds.
During the period of holding Comms, the holder of CommsEase should classify the financial assets in accordance with the requirements of the New Financial Instruments Standards, according to its business model for managing CommsEase and the characteristics of CommsSense's contractual cash flows. If the business model of Yunxin holder is to collect contract cash flow (holding maturity), it should be classified as financial assets measured at amortized cost, and the balance sheet should be included in the item of "notes receivable"; If the business model of the holder of Yunxin is a business model that aims at both collecting contractual cash flows and selling (factoring) the financial asset, it should be classified as a financial asset measured at fair value through other comprehensive income, measured at fair value at each balance sheet date, and included in the "receivables financing" item on the balance sheet.
Regardless of whether it is classified as a financial asset measured at amortized cost or classified as a financial asset measured at fair value through other comprehensive income, the holder needs to carry out impairment accounting treatment and recognize the loss provision for the Yunxin held on the basis of expected credit losses. The holder's estimate of expected credit losses shall be weighted by probability according to the likelihood of incurring credit losses and the likelihood of not incurring credit losses.
In practice, since Yunxin is different from general commercial acceptance bills and bank acceptance bills, it is recommended to use Yunxin's financial assets as a separate combination of high-quality credit records, combined with historical loss rates and forward-looking information to make impairment provisions.
Following the previous example, suppose that on June 1, 20×1, when Company A received Yunxin, it classified such financial assets as financial assets measured at fair value through other comprehensive income according to the contractual cash flow and business model. As at June 30, 20×1, the fair value of the financial asset (discounted at the prevailing interest rate on the balance sheet date based on the recoverable amount of Yunxin) was 5.99 million yuan, and Company A measured the loss provision according to the expected credit loss of Yunxin throughout its duration. The company believes that there is no significant credit risk in such financial assets held by the company, and will not incur significant losses due to the default of the core enterprise, and uses the impairment matrix to determine the credit loss of the relevant financial assets on the basis of the portfolio, and the estimated credit impairment loss is 30,000 yuan.
What are the relevant dispute points for the accounting treatment of Yunxin business, and can they be recorded in accounts receivable?
On June 30, 20×1, when Company A recognized the change in fair value, it debited "other comprehensive income" of 10,000 yuan and credited "notes receivable - Yunxin" of 10,000 yuan. When the impairment loss is recognized, the "credit impairment loss" of 30,000 yuan is debited and the "other comprehensive income" is credited of 30,000 yuan. At the time of compiling the statement, the book balance of "notes receivable - Yunxin", that is, the fair value of 5.99 million yuan, was listed under the item of "receivables financing", and the credit impairment loss of 30,000 yuan was recognized in the income statement.
Authors: Wang Li, Associate Professor, School of Accounting, Shandong University of Finance and Economics, Wang Chenyu, Master Student, School of Accounting, Shandong University of Finance and Economics, and Pan Xiuqin, Associate Professor, School of Accounting, Shandong University of Finance and Economics.
Source: Finance & Accounting
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