1. What is impairment provision?

Asset impairment means that the recoverable amount of an asset is lower than its book value.

Bad debt provisions, inventory depreciation provisions, fixed asset impairment provisions, intangible asset impairment provisions, construction in progress impairment provisions, long-term investment impairment provisions, entrusted loan impairment provisions, and short-term investment depreciation provisions.

When (1) the market price of an asset drops significantly in the current period, the drop is significantly higher than the expected drop due to the passage of time or normal use.

(2) The economic, technological or legal environment in which the enterprise operates and the market in which the assets are located have undergone major changes in the current period or will occur in the near future, thus adversely affecting the enterprise.

(3) Market interest rates or other market investment returns have increased in the current period, which affects the discount rate used by the enterprise to calculate the present value of the estimated future cash flows of assets, resulting in a significant reduction in the recoverable amount of assets.

(4) There is evidence that the asset is obsolete or its entity has been damaged.

(5) The assets have been or will be idle, terminated, or planned to be disposed of in advance.

(6) Evidence from the company’s internal report shows that the economic performance of the asset has been or will be lower than expected, such as the net cash flow created by the asset or the operating profit (or loss) realized is far lower than (or higher than) the estimated amount, etc.

(7) Other signs indicating that the asset may have been impaired.

Provision for impairment

2. What does it mean to write off overdraft losses?

The write-off of overdraft losses refers to the write-off of credit card overdraft losses. It is the act of identifying bad debts and accounting for eligible credit card loans in accordance with prescribed procedures. Certain conditions need to be met when writing off, such as legal procedures such as litigation, public security reporting, or recourse for more than one year.

3. What is loan impairment provision?

To put it simply, loan impairment provision is the amount withdrawn by commercial banks to resist loan risks to make up for the losses that the bank cannot recover when due. The provision for loan losses is the provision for bad debts that the bank cannot recover after lending to customers.

For example, a bank lends 30 million yuan to a customer. After the customer receives the money, he or she is unable to repay the money on time due to environmental changes or poor management. At this time, the bank must recover the money as expected. Loan impairment provisions are made based on the difference between the amount and the original loan amount.

The significance of loan impairment provisions: 1. Meet policy requirements: This part of the assets is still owned by the bank, rather than the commercial bank actually losing the property rights of this part of the assets. 2. Adjust profits: In order to meet the performance requirements of the head office, a few banks increase loan loss provisions, thereby increasing operating expenses and thereby adjusting profits. In fact, it "hides" the bank's operating profits and has no impact on the actual profits of the bank's operations.

4. What is loan impairment provision?

To put it simply, the loan impairment provision is the provision for loan losses that a commercial bank can recover to resist loan risks. It means that after the bank lends to the customer, it cannot recover the loan of 30 million yuan from the customer. After receiving the money, due to environmental changes or poor management, etc., the bank will make loan impairment provisions based on the expected recovery. The significance of loan impairment provisions:

1. Meet policy requirements: this part of the assets is still owned by the bank, rather than the commercial bank will actually lose this part

2. Adjust profits: a few banks In order to meet the performance requirements of the head office, profits are adjusted by increasing loan loss provisions. In fact, it "hides" the bank's operating profits and has no impact on the actual profits of the bank's operations.