Relocation expenses incurred by the enterprise should be credited where

According to the provisions of the document "Notice of the Ministry of Finance on the Financial Processing Issues Relating to the Relocation Compensation Money Received by Enterprises from the Government" (Cai-Enterprise [2005] No. 123), the relocation compensation money received by enterprises from the government is accounted for as a special payable; the interest on the deposit of the relocation compensation money is transferred to the special payable together. Losses or expenses incurred by an enterprise in the course of relocation and reconstruction are accounted for by distinguishing the following four situations. First, the fixed assets sold, scrapped or destroyed due to relocation are accounted for as fixed asset liquidation, and their net losses are written off as special accounts payable; second, the costs incurred for dismantling, transporting, re-installing and debugging machinery and equipment are directly written off as special accounts payable; third, the land use rights of the enterprise that are lost due to relocation and originally accounted for as an asset are directly written off as special accounts payable; fourth, the costs and expenses incurred for relocating the employees are directly written off as special accounts payable; and the interest on the deposit of the relocation compensation is added to the special accounts payable. The document also stipulates that the expenses for the relocation of enterprises shall be directly written off as special accounts payable. At the same time, the document also stipulates that after the end of the relocation of enterprises, special accounts payable, if any balance, need to be increased by the capital reserve and all shareholders **** enjoy; special accounts payable, if any shortfall, will be included in the current profit and loss.

It should be noted that the above provisions of the document only clarify the accounting treatment of the enterprise from the government to obtain the relocation compensation, but not clear enterprise from the government to grant... The party that obtains the compensation fee for the right to use the land, as well as the transfer of the right to use the land and obtain the compensation fee should be how to carry out the accounting treatment. In the author's opinion, the compensation fee obtained by the enterprise from the enterprise which obtained the land use right by way of grant should also belong to the compensation payment obtained from the government, and should also be handled in accordance with the above provisions; for the compensation fee obtained by transferring the land use right, it should be accounted for in accordance with the relevant provisions of the transfer of intangible assets.

Processed in accordance with the provisions of the new accounting standards:

The "Interpretation of Enterprise Accounting Standards No. 3" stipulates that enterprises relocated due to the overall planning of towns and cities, the construction of reservoirs, shantytown renovation, subsidence zone management and other public **** interests, received from the government from the financial budget directly allocated to the compensation for the relocation of the money should be handled as a special accounts payable. Among them, those belonging to the compensation for the loss of fixed assets and intangible assets incurred by the enterprise in the process of relocation and reconstruction, related cost expenses, loss of work stoppage and new assets to be constructed after relocation shall be transferred from the special accounts payable to deferred income and be accounted for in accordance with Accounting Standard for Business Enterprises No. 16 - Government Grants. Any balance of the relocation compensation obtained by the enterprise after deducting the amount transferred to deferred income shall be treated as capital surplus. Relocation compensation payments received by an enterprise other than those specified above shall be accounted for in accordance with Accounting Standard No. 4, "Fixed Assets" and Accounting Standard No. 16, "Government Grants".

According to the above provisions, only the relocation compensation payments directly allocated by the government from the financial budget need to be accounted for through "special accounts payable" first, and then transferred from "special accounts payable" to "deferred income" and "capital surplus". "The relocation compensation obtained from other sources is not accounted for through "special accounts payable", but should be handled in accordance with the transfer of fixed assets or intangible assets. By the same token, the compensation fees obtained from the party that acquired the land use right due to the government's resumption of the land use right should be treated as the financial funds obtained from the government.

This shows that both the enterprise accounting system and the new accounting standards are similar in their accounting treatment of the relocation compensation obtained by enterprises. Therefore, the relocation compensation obtained by enterprises implementing the new accounting standards as a result of the government's resumption of land use rights should be recognized as deferred revenue in accordance with the provisions of the accounting standards.