Recently, the Ministry of Finance drafted “Interpretation of Accounting Standards for Enterprises No. 22" and solicited comments from relevant agencies. The draft for solicitation of comments further refines the application conditions of the Long-term Equity Investment Equity Law and the presentation of cheap purchase profits under the Equity Law, and proposes criteria for determining significant effects when the voting power ratio is less than 20%. Investors must meet four conditions at the same time before they can use the Equity Law for accounting. In the current market environment where A-share bank stocks are broken on a large scale, cheap purchase profits can bring investors considerable non-operating income. If the relevant rules are finally implemented, although the underlying logic of insurers and AMC allocating bank shares will not change, the equity law accounting threshold will increase, and it will be more difficult to obtain benefits from cheap purchases.

Recently, the Ministry of Finance drafted “Interpretation of Accounting Standards for Enterprises No. 22" and solicited comments from relevant agencies. The draft for solicitation of comments further refines the application conditions of the Long-term Equity Investment Equity Law and the presentation of cheap purchase profits under the Equity Law, and proposes criteria for determining significant effects when the voting power ratio is less than 20%. Investors must meet four conditions at the same time before they can use the Equity Law for accounting. In the current market environment where A-share bank stocks are broken on a large scale, cheap purchase profits can bring investors considerable non-operating income. If the relevant rules are finally implemented, although the underlying logic of insurers and AMC allocating bank shares will not change, the equity law accounting threshold will increase, and it will be more difficult to obtain benefits from cheap purchases.