This is the best time, this is the worst time. Dickens' famous words in A Tale of Two Cities are a perfect way to describe the current situation of financial asset management companies. As the domestic economy continues to decline, the non-performing loans of commercial banks increase, the risk projects of non-bank financial institutions increase, and the debts of entities continue to accumulate. As an asset management company with non-performing asset management as its core business, due to the abundant supply of non-performing assets, it instantly became a pig standing on the cusp and ushered in a rapid development opportunity.
At the same time, however, with the deepening of supply-side reform and the implementation of policies such as de-capacity and de-leverage, the profitability of debtors or related guarantors of non-performing assets purchased by asset management companies has weakened, the value of collateral has decreased, the risk of recovery or disposal of non-performing debt assets has increased, the impairment reserve has increased, and the pressure on statements has gradually become prominent.
In addition, the regulatory authorities are increasingly strict in their supervision of capital adequacy ratio and asset quality. First, the Measures for the Supervision of Financial Asset Management Companies (No.4120 14) issued on 20/4 stipulates that the capital adequacy ratio of the parent company of a financial asset management company group shall not be lower than 12.5%. Later, in 20 16, the Notice on Strengthening Asset Risk Classification Management of Financial Asset Management Companies (No.2016) was issued, requiring financial asset management companies to strengthen asset quality management, unify asset risk classification standards, comprehensively and accurately identify, monitor and manage the asset risks of groups and legal persons, and make full provision for asset impairment on the basis of true classification.
These pressures from statements and supervision force financial asset management companies to strive to find and constantly innovate the channels and methods of bad reporting. In order to facilitate everyone to have an overall understanding of the current mainstream reporting models, this paper attempts to sort out the common bad reporting models of financial asset management companies and make a preliminary analysis and discussion on their effectiveness and compliance. Due to personal knowledge and practical experience, the trading modes listed below may be incomplete or incorrect. Welcome colleagues in the industry to exchange views and correct me.
| Mode 1: Sales to subsidiaries
This model is relatively simple. The asset management company sells the bad creditor's rights under the account of "investment in receivables" to the subsidiary, and after receiving it, the subsidiary transfers it to the account of "financial assets designated as fair value and whose changes are included in the current profits and losses", so as to avoid the provision for asset impairment by transferring the bad creditor's rights between different accounting accounts.
According to the Accounting Standards for Business Enterprises No.22-Recognition and Measurement of Financial Instruments, amortized cost is adopted for subsequent measurement of receivables. In case of impairment, the impairment loss of assets shall be confirmed and the impairment reserve shall be withdrawn. However, financial assets designated as being measured at fair value and whose changes are included in current profits and losses are subsequently measured at fair value, and impairment losses are not recognized and impairment reserves are accrued.
At the same time, the Notice of CBRC on Strengthening the Asset Risk Classification Management of Financial Asset Management Companies (Yin Jian Fa [2065438+06] No.2) stipulates that the acquisition and disposal of non-performing assets accounted for in the subject of "financial assets designated as fair value and whose changes are included in the current profits and losses" shall be measured at fair value in accounting, and the risk is mainly manifested as market risk, so the risk classification may not be carried out according to the requirements of this notice. The implication is to abide by the provisions of the Accounting Standards for Business Enterprises. For financial assets designated as being measured at fair value and whose changes are included in the current profits and losses, impairment losses are not recognized and risk reserves are not accrued.
Therefore, by selling non-performing assets to subsidiaries, asset management companies change accounting subjects, mainly to reduce impairment reserves, thus achieving the purpose of beautifying financial statements, and at the same time avoiding risk classification from supervision, thereby reducing impairment reserves, writing down risky assets, optimizing capital adequacy ratio and other regulatory indicators, which can be described as killing two birds with one stone.
However, the effectiveness of the transfer of financial assets needs to meet the relevant requirements of the Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets. Article 7 of the No.23 Standard stipulates: "If an enterprise has transferred almost all the risks and rewards of ownership of a financial asset to the transferee, it shall terminate the recognition of the financial asset; If almost all the risks and rewards in the ownership of a financial asset are retained, the recognition of the financial asset will not be terminated. Derecognition refers to the resale of financial assets or financial liabilities from the account and balance sheet of the enterprise. "
From this perspective, whether an asset management company transfers non-performing assets to its subsidiaries depends on whether the risks and rewards of ownership are transferred to the subsidiaries. If the risks and rewards related to creditor's rights have been transferred to subsidiaries, non-performing assets can be reported, otherwise they cannot be reported.
From the perspective of consolidated statements, according to the relevant provisions of Accounting Standards for Business Enterprises No.2-Long-term Equity Investment, Accounting Standards for Business Enterprises No.33-Consolidated Financial Statements and Supervision Guidelines for Financial Asset Management Companies (Trial) issued by CBRC, from the perspective of the whole group, the ownership of this non-performing asset has not changed substantially, so it is impossible to terminate the recognition and reporting. From the perspective of consolidated supervision by CBRC, the non-performing assets at the consolidated statement level should be put into the account of "financial assets designated as fair value and whose changes are included in current profits and losses" and put back into the account of "investment in receivables", and the actual risks should be classified, and the impairment reserve should be fully accrued.
| Mode 2: After-sale repurchase
The asset management company sells its receivable bad creditor's rights to other companies, and then repurchases the creditor's rights, which are included in the designated bad creditor's rights. The receivables and designated non-performing creditor's rights mentioned here refer to the non-performing creditor's rights accounted for under the above-mentioned "investment in receivables" and "financial assets designated at fair value through profit or loss".
To understand these two subjects, we must start with the business types of non-performing creditor's rights assets of asset management companies. According to the classification of business models, the non-performing debt assets business of asset management companies is divided into acquisition and disposal business and acquisition and reorganization business. There are many differences between them in the sources of acquisition, legal relationship, income model and accounting. The main differences are as follows:
As can be seen from the above table, the acquisition and disposal of non-performing loans is generally referred to as "designated non-performing loans" because the acquisition and disposal business has passed the accounting of "financial assets measured at fair value and whose changes are included in current profits and losses"; The acquisition and restructuring business is accounted for by the account of "investment in receivables", so the bad debts of acquisition and restructuring are generally referred to as "bad debts of receivables".
From the above analysis, it can be seen that no matter from the accounting measurement or regulatory requirements, the designated non-performing loans have no provision for impairment, and there is no pressure and motivation to make statements. On the one hand, non-performing loans of accounts receivable should be provided with impairment reserves, on the other hand, risks should be classified in strict accordance with regulatory requirements and included in risky assets, which has greater motivation to make statements. This model is to avoid impairment by selling the bad creditor's rights of repurchase receivables and counting them into the designated bad creditor's rights.
However, according to the requirements of Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets, an enterprise can stop recognizing a financial asset only when it transfers almost all the risks and rewards of ownership to the transferee. From the transaction structure of this model, we can see that because of the existence of repurchase agreement, asset management companies have not really transferred the risks and rewards related to assets, so they cannot terminate the recognition of non-performing claims, and should be measured and accounted according to the original receivables.
| Method 3: Recover the creditor's rights after maturity.
When the asset management company transfers the income right of non-performing creditor's rights to other companies, both parties agree that the asset management company will recover the remaining creditor's rights after the expiration of the collection period, regardless of the actual collection results.
The operation mode of this mode is similar to that of Mode 2, with two differences:
First, the transfer objects are different. Mode 2 transfers non-performing loans, which transfers the right of non-performing loans. The former is mainly subject to the Administrative Measures for the Batch Transfer of Non-performing Assets of Financial Enterprises and related regulations issued by the Ministry of Finance and the China Banking Regulatory Commission, while the latter is mainly regulated by the Notice of the China Banking Regulatory Commission on Regulating the Transfer of Credit Assets Income Rights of Banking Financial Institutions, so there are many differences. I will write about these differences later, so I won't go into details here.
Second, the repurchase (_) period is different. Mode 2: after the transfer of creditor's rights, the purpose of repurchase is mainly to change accounting subjects, so there are not too many restrictions on the term, and most of them are repurchase after sale; In this mode, due to the transfer of creditor's rights, the transferee mainly enjoys the interest collection corresponding to the creditor's rights, so the recovery period is when the collection period expires.
Whether this model can be realized needs to be analyzed from two aspects, one is the transfer link and the other is the recovery link.
With regard to the transfer of income right, according to the Notice on Regulating the Transfer of Income Right of Credit Assets of Banking Financial Institutions (Y.J.F. [2065438+06] No.82) issued by CBRC on April 27, 1965, after the transfer of income right of non-performing assets, assets at accounting level can be listed according to Accounting Standards for Enterprises No.23-Transfer of Financial Assets; However, the capital needs to be fully withdrawn according to the original credit assets, that is, the capital cannot be listed; For the transfer of income right of non-performing assets that continues to be involved, the part that continues to be involved should be included in the calculation of non-performing loan balance, non-performing loan ratio and provision coverage ratio, that is, non-performing assets cannot be listed. This means that from the perspective of supervision, the transfer of the beneficial right of non-performing creditor's rights cannot be expressed.
From the recovery link, because the asset management company and the transferee agreed that after the expiration of the collection period, the asset management company will recover the remaining creditor's rights regardless of the actual collection results, that is, the risks and rewards related to the creditor's rights have not really been transferred from the asset management company, and the transaction does not meet the conditions for terminating the confirmation. Therefore, from the perspective of the whole transaction chain after the transfer expires, this model has not reached the accounting level.
| Mode 4: Anti-entrustment of acquisition between asset management companies
In this model, it is assumed that there are two asset management companies, A and B. Asset management company B receives the creditor's rights of accounts receivable from asset management company A, and at the same time signs an entrusted collection agreement with company A to stipulate the collection period and collection object. Company B pays the payment in installments, and the payment time may be similar to the time and amount that Company A pays the collection income, or it may be that Company B pays the payment after Company A pays the collection income of Company B.. ..
The purpose of company A's transaction is to report the creditor's rights assets of accounts receivable. However, according to the requirements of Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets, an enterprise can only stop recognizing a financial asset when it transfers almost all the risks and rewards of its ownership to the transferee.
According to the collection agreement, the asset is still managed and collected by Company A. Based on the payment terms in the actual contract, Company B has controllable risks and fixed remuneration. That is to say, the main risks and rewards related to the creditor's rights are still borne by company A, and have not really been transferred to company B, so company A should not stop recognizing the assets.
Mode 5: Hierarchical Holding Mode
The usual business model is that the asset management company sells the non-performing creditor's rights to its subsidiaries, and the subsidiaries set up an asset management plan with the benefit right of the non-performing creditor's rights as the target, and classify the share of the asset management plan (generally divided into priority, intermediate level and inferior level), which is jointly funded by the asset management company, subsidiaries and external investors. The design of hierarchical structure is mainly to provide credit enhancement for external investors.
According to the relevant provisions of the Accounting Standards for Business Enterprises, from the individual statements of the company, if the asset management company has transferred the risks and rewards related to the creditor's rights to its subsidiaries, it can fill in the bad creditor's rights. From the perspective of consolidated statements, we should pay attention to whether the group can control the asset management plan.
According to the Accounting Standards for Business Enterprises No.33-Consolidated Financial Statements, investors must have two basic elements to achieve control. One is to enjoy variable income because of participating in the investee, and the other is to have the right to the investee and have the ability to use the right to the investee to influence the amount of income. Only when the investor has the above two elements at the same time can he control the investee.
Therefore, it is necessary to combine the hierarchical holding mode of asset management plan to see whether the group's investment in asset management plan conforms to the two basic elements controlled in the accounting standards for business enterprises. If yes, the asset management plan needs to be included in the scope of consolidation, that is, bad debts cannot be reported at the level of consolidated statements; If not, the asset management plan does not need to be included in the scope of consolidation, that is, the non-performing claims are reported at the level of consolidated statements.