What does bad debt write-off mean?

Write-off of bad debts refers to the bank's use of provision for doubtful debts to write off loans and investments that can't be recovered for a long time after being confirmed by internal audit, so as to make the assets and income reflected in the books more real. A sound bad debt write-off system is the requirement of accounting prudence and authenticity, and it is an important basis for objectively reflecting the bank's operating conditions and effectively resisting financial risks.

If the bank has bad debts, it needs to provide conclusive evidence. Those who meet the prescribed conditions after examination can be reported at any time and approved at any time, and need to be written off from the accrued bad debt reserve in time. The Bank shall not conceal non-reporting, long-term losses or cover up non-performing assets.

1. What does bad debt write-off mean?

Bad debts only refer to the inability to solve at present, such as the inability of enterprises to repay loans for a period of time; The so-called "write-off of bad debts" refers to the method of forcing banks to eliminate existing loan accounts and give certain compensation (the amount depends on the situation), so it is definitely a loss for banks.

In general, the main means for countries to write off bad debts are state-owned enterprises and state-owned (holding) banks, such as Industrial and Commercial Bank of China and Agricultural Bank.

Two. Conditions for write-off of bad debts

1. Loans that the borrower and guarantor are declared bankrupt according to law and cannot be repaid after fixed repayment.

2. The borrower dies, or is declared missing or dead according to the law, and the loan is not paid off with his property or inheritance.

3. The borrower suffers from major natural disasters or accidents, and suffers huge losses and cannot obtain insurance compensation, or part or all of the loan that has not been paid off after being paid off with insurance compensation.

4 overdue loan projects approved by the State Council.

Write-off of bad debts must follow the principles of strict identification conditions, providing conclusive evidence, serious accountability, door-to-door, reporting step by step, examination and approval, confidentiality and accounting.

Three. Accounting treatment report of bad debt write-off

If the bank provides conclusive evidence of bad debts and meets the prescribed conditions after examination, it shall report them at any time, examine and approve them at any time, and write them off from the bad debt reserve in time. Banks shall not conceal non-reporting, long-term losses and cover up non-performing assets. Write-off of bad debts must follow the principles of strict identification conditions, providing conclusive evidence, serious accountability, reporting step by step, examination and approval, confidentiality to the outside world, and having accounts to check.

Banks must provide the following materials to declare and write off bad debts:

1. Information about the borrower or the invested enterprise, including the bad debt write-off declaration form (filled in by the bank) and the approval materials, the detailed materials about the occurrence of creditor's rights and equity, the borrower (cardholder), guarantor and guarantee method, the basic situation and current situation of the invested enterprise, and the liquidation of property, etc.

2. The investigation report of the handling bank (company), including the causes of bad debts, the remedial measures taken and their effects, the specific recovery process and proof of the borrower (cardholder) and guarantor, the reasons for the disposal and write-off of the collateral, the relevant documents of the creditor's rights and equity managers, the heads of departments and units and the responsible persons;

3. Other relevant materials.

Bad debts that cannot be proved by conclusive evidence shall not be written off.

legal ground

Notice of the Ministry of Finance on Printing and Distributing the Administrative Measures for the Withdrawal and Write-off of Bad Debt Reserves of Financial Enterprises

Article 2 The financial enterprises mentioned in these Measures refer to policy banks, commercial banks, insurance companies, securities companies, trust and investment companies, finance companies, financial leasing companies, urban and rural credit cooperatives and other enterprises engaged in financial business approved by the People's Bank of China, China Securities Regulatory Commission and China Insurance Regulatory Commission.

Article 3 After a financial enterprise has taken all possible measures and implemented necessary procedures, the creditor's rights or equity that meet one of the following conditions can be recognized as bad debts:

(1) Creditor's rights that cannot be recovered after the borrower and guarantor are declared bankrupt, closed, dissolved or terminated as legal persons according to law;

(2) The creditor's rights that cannot be recovered after the borrower dies, or the borrower is declared missing or dead in accordance with the provisions of the General Principles of Civil Law of People's Republic of China (PRC) and the General Principles of Civil Law of People's Republic of China (PRC), and the financial enterprise shall pay off his property or inheritance according to law and recover the creditor's rights of the guarantor;

(3) Creditor's rights that can't be recovered after the borrower suffers from major natural disasters or accidents and suffers huge losses and can't get insurance compensation, or after getting insurance compensation, it is really unable to repay part or all of the debts, and the financial enterprise has paid off its property and recovered from the guarantor;

(4) Creditor's rights that the borrower and guarantor have completely stopped their business activities although they have not been declared bankrupt, closed or dissolved according to law, and have been cancelled, their business licenses revoked and their legal person status terminated by the administrative department for industry and commerce at or above the county level according to law, and the financial enterprise has failed to recover after claiming compensation from the borrower and guarantor;

(5) The creditor's rights that cannot be recovered by the financial enterprise after the borrower violates the criminal law and is punished according to law, and his property is insufficient to repay the borrowed debts and there are no other debtors;

(6) Creditor's rights that can't be recovered by the financial enterprise after the borrower and the guarantor can't repay the debts due and the borrower and the guarantor have no property to execute after being enforced by the court;

(7) Creditor's rights that can't be recovered after the borrower can't repay the due debts due to the above reasons (1) to (6), the legally acquired debt-paying assets shall be accounted for according to the fair market value confirmed by the assessment, and the difference less than the loan principal and interest after deducting the debt-paying assets;

(8) When an advance payment occurs in opening a letter of credit, handling an acceptance bill, opening a letter of guarantee, etc. 3. The applicant for the letter of credit and the guarantor are unable to repay the advance due to the reasons mentioned in Items (1) to (7) above, and they are still unable to recover the advance after being recovered by the financial enterprise;

(9) Foreign investment of financial enterprises that have the right to invest according to the laws and regulations of the state, as well as the equity that the invested enterprises are declared bankrupt, closed down, dissolved and terminated as legal persons according to law, and the financial enterprises cannot recover after liquidation and recovery;

(10) Creditor's rights projects approved for write-off by the State Council.