| Changchun UP Optotech Co., Ltd. (mentioned as "UP Corporation" hereafter) was set up in 2001, invested by Changchun institute of optics, fine mechanics and physics in which the system in whole of its enterprises being engaged in photoelectric instruments reformed and assets assessed, combined with Guangdong Fenghua advanced technology Co., Ltd. etc., six shareholders in all. Ever since its establishment, UP Corporation has started to execute the Enterprise Accounting System(mentioned as ;'the new system " hereafter).Since the new system even more emphasizes principles such as prudence, importance, substance important than form and etc., requiring the enterprise estimating all kinds of risks and losses adequately, neither over valuing the assets and gains, nor undervaluing the debts and costs, it profits UP Corporation to making public the accounting information truthfully and contributes to establishing modern enterprise system, so as to create good conditions for the future development of the enterprise. However, since the new system has disagreements with Taxation Laws in counting and writing-off of the devaluation reserves, deduction time and standard of costs, especially the depreciation of the devaluation fixed assets, treating the accounting problems such as accounting the bad debt reserves, counting the assetdevaluation reserves, depreciation method of fixed assets, costs, costs deduction, debt cost capitalization, first cost amortization and etc. has resulted in many adjustments of large amounts at the time of taxation in the enterprise. When checking long term equity investment using equity method according to the new system, the difference between the new system and Taxation Laws leads to the investment gains and losses end of every year of UP Corporation only reflected in the next year, the investment losses made up by the future earnings of the subsidiary companies. In correlation transaction of selling goods between UP Corporation and its correlator-- Changchun institute of optics, fine mechanics and physics, the difference between the new system and Taxation Laws leads to income of the goods which cost profit ratio over 20% should be confirmed as per 120% book value, the over parts will be counted in capital reserve funds. However, from the value added tax, if the cost profit ratio of correlation transaction exceeds 20%. the selling term ratal of value added tax should be calculated in real transaction price in the enterprise.Although the national taxation policies are formulated in terms of the national economic conditions, but concreting to some region, some vocation, some product, some item, different taxation policies are performed because of the subjective or objective reasons. Some revenue policies in special regions may bring about great difference with the new system and have larger influence on accounting. For example, the transformation policy of value addedtax, i.e., The Formulation of some Problems about Enlarging the Counterweighing Range of Value Added Tax in Northeastward formulated by Ministry of Finance and General Tax Bureau, aiming at the six vocations such as equipment manufacturing industry and etc. in northeastward, the state has formulated that general taxpayers can counterweigh value added tax if the fixed assets and transport expenses resulted from them are purchased, made by themselves or financing leased. When the corporation purchases the fixed assets, the difference between the new system and the Taxation Law in the original cost of fixed assets, current depreciation, current cost amount, the buying term ratal of value added tax and etc., has brought much inconvenience to the accounting of the corporation. The national file whose fiscal number is [1999J290 aimed for industry concession has specified that in the enterprises investing the technical transforming items conforming to the national industry policy in our domain, the 40% investment of domestic equipments required in the item can be counterweighed from the newly increased enterprise income tax i...
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