China’s new accounting rules on enterprise data resources to have ‘greater impact’ on Big Tech firms, telecoms network operators

China’s efforts to promote the development of its digital economy are expected to receive a big boost next year, when an updated set of accounting rules allow companies to include data resources as either “intangible assets” or “inventories” in their financial statements.

Under the Interim Provisions on Accounting Treatment of Enterprise Data Resources released by the Ministry of Finance on Monday, corporate data could be classified as intangible assets when these meet relevant requirements in accounting standards, while data held for sale in daily business activities could be recognised as inventories.

The new rules, which will take effect on January 1, are expected to have “a greater impact” on companies that produce and purchase data, such as those in the computing and telecommunications industries, according to a research note published on Tuesday by Beijing-based investment bank Citic Securities. That would include the country’s largest internet companies and telecoms network operators.

The interim provisions are expected to help companies sort out which data resources can be recognised as accounting assets and ascertain in which category those belong, according to a Finance Ministry statement on Monday.

The facade of China’s Ministry of Finance headquarters in Beijing is seen on August 23, 2018. Photo: Reuters

The updated accounting rules mark Beijing’s latest initiative to advance the development of the nation’s digital economy by applying commercial rules to information.

It comes after Beijing unveiled plans in March for a proposed National Data Bureau, a new agency to be formed as part of a sweeping overhaul of government institutions under the State Council.

In April 2020, the country’s policymakers added data as a new production factor that is in the same category as land, capital and human labour.

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On Monday, Chinese Premier Li Qiang said during a State Council study session that the country would “strengthen, optimise and expand” its digital economy to empower high-quality development, according to a report by state media Xinhua News Agency.

Li indicated that the digital economy will enjoy broad development, thanks to China’s massive market, abundant data resources and rich application scenarios.

The value of China’s digital economy reached 50.2 trillion yuan (US$6.9 trillion) last year, which accounted for 41.5 per cent of the nation’s economic output and ranked second globally behind the United States, according to a report in April by the China Academy of Information and Communications Technology.

At present, the data-related spending by enterprises are primarily categorised as costs or operational expenses, but such outlay can be capitalised to improve a company’s business performance after the rule takes effect, according to the Citic Securities research note.

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The new rules will also increase the value of data resources held by enterprises, which would help these firms refine how they manage these assets and promote their application, according to a research note by accounting firm Deloitte on Tuesday.

The size of China’s big data industry has grown rapidly over the past few years. This sector’s value reached 1.3 trillion yuan in 2021, according to official data from the China Academy of Information and Communications Technology.

South China Morning Post