In order to ensure the smooth implementation of the new accounting standards for business enterprises by securities investment funds (hereinafter referred to as "funds"), we have successively issued the Notice on the Connection between the Implementation of Accounting Standards for Business Enterprises by Securities Investment Funds and the Valuation of Securities Investment Funds (Cai Hui Zi [2007] 15). According to the recent market changes and the problems existing in the determination and measurement of fair value in the implementation of the new standards by fund management companies, this guidance is formulated to further standardize the fund valuation business, especially the valuation of non-market investment products such as long-term suspended stocks:
I. A fund management company shall, in strict accordance with the new standards, the relevant provisions of the FSC and the agreement on valuation in the fund contract, value the investment varieties held by the fund according to the following principles:
(1) For the investment products with active market, if there is a market price on the valuation date, the fair value shall be determined by using the market price; If there is no market price on the valuation date, but the economic environment has not changed significantly after the recent trading day, and there has been no major event affecting the securities price by the securities issuer, the fair value shall be determined by using the recent trading market price.
(2) For the investment products with active market, if there is no market price on the valuation date, and the economic environment has changed significantly after the recent trading day or the securities issuer has a major event that affects the securities price, so that the potential valuation adjustment has more than 0.25% impact on the fund's net asset value on the previous valuation date, the fair value should be determined with reference to the current market price and major changes of similar investment products.
(3) When there is no active market for investment products, and the impact of its potential valuation adjustment on the net asset value of the fund on the previous valuation date is more than 0.25%, the fair value of the investment products shall be determined by the valuation technology generally recognized by market participants, and verified by the actual transaction price in the past.
Two, in the process of fund valuation, especially in accordance with the provisions of the first paragraph (two) or (three), the fund management company shall follow the following principles and procedures:
(1) The fund management company shall ensure that the valuation of the fund is fair and reasonable, especially that the valuation is not distorted, so as not to adversely affect the fund share holders.
(2) A fund management company shall formulate sound and effective valuation policies and procedures, which shall be implemented after being approved by the management of the fund management company. Valuation policies and procedures should clearly define the division of labor and responsibilities of all parties and personnel involved in the valuation process, and clarify the valuation methods of all fund investment varieties, especially the valuation models, assumptions, parameters and their verification mechanisms used in the valuation in accordance with the provisions of Article 1 (2) or (3).
(3) A fund management company shall maintain the consistency of valuation policies and procedures when valuing investment varieties. Considering the investment strategy, the valuation policies, procedures and related methods of the same securities held by different funds managed by the same fund management company should be consistent. Unless it is necessary to update the valuation policies or procedures, the established valuation policies and procedures should be applied continuously. In order to ensure the implementation of the principle of consistency, fund management companies should establish relevant internal control mechanisms.
(4) The fund management company shall evaluate the valuation policies and procedures on a regular basis, and revise the valuation methods in a timely manner after the occurrence of situations that affect the effectiveness and applicability of the valuation policies and procedures to ensure their continuous application. The proposed revision of valuation policies and procedures shall be approved by the management of the fund management company before implementation. When adopting new investment strategies or investing in new varieties, funds should evaluate the applicability of existing valuation policies and procedures.
(5) When adopting valuation policies and procedures, fund management companies should fully consider the experience, professional ability and independence of all parties and personnel involved in the valuation process, and reduce or avoid the occurrence of valuation deviation by setting up valuation committees, referring to the valuation opinions of industry associations and the valuation data of independent third parties.
3. A fund management company shall fulfill its disclosure obligations related to fund valuation according to law, and disclose at least the following information in its periodic report: valuation policies and major changes. Valuation in accordance with the principles specified in Item (2) or Item (3) of Article 1 above shall involve the valuation model, assumptions and parameters, as well as the impact on the net asset value of the fund and the current profit and loss; A description of the division of responsibilities, professional ability and relevant work experience of all parties and personnel involved in the valuation process; The extent to which the fund manager participates in or decides the valuation; Any major conflicts of interest between the parties involved in the appraisal process; Information such as the nature and extent of any pricing services that have been signed.
Where a fund management company changes its valuation from Item (1) of Article 1 to the principle specified in Item (2) or Item (3) above, it shall, in line with the principle of protecting the interests of fund share holders to the maximum extent, issue a temporary announcement in time.
Four. The custodian bank shall conscientiously perform the review responsibility of valuation and net worth calculation according to the requirements of laws and regulations. If a fund management company changes its valuation from Item (1) of Article 1 to the principle stipulated in Item (2) or (3) above, it shall promptly notify the custodian bank. The custodian bank shall carefully check the valuation policies and procedures adopted by the fund management company. When there is any objection, the custodian bank has the responsibility to ask the fund management company to make a reasonable explanation and reach an agreement through active discussion.
Five, the fund management company according to the first paragraph (1) to (2) or (3) the principle of valuation, resulting in changes in the net asset value of the fund more than 0.25%, should hire an accounting firm to audit. The accounting firm shall issue audit opinions and reports on the appropriateness of the relevant valuation models, assumptions and parameters adopted by the fund management company.
When issuing an audit report on the annual financial report of the fund, an accounting firm should fully consider the valuation policy of the fund and its major changes during the reporting period, especially the appropriateness of applying the principles stipulated in item (2) or (3) of the above Article 1, the objectivity and reliability of valuation by using external information, and the adequacy and timeliness of relevant disclosure.
Six, China Securities Industry Association Fund Valuation Working Group should organize people in the industry to actively study the valuation methods applicable to Item (2) or (3) of Article 1 for the reference of fund management companies, but fund management companies cannot be exempted from their related valuation responsibilities. If a fund management company adopts other valuation methods, it shall disclose in its periodic report the reasons for adopting this method and the differences between this method and the valuation methods generally adopted in the industry.
Seven, accounting standards, such as the accounting and valuation of securities investment funds have new specific provisions, the China Securities Industry Association Fund Valuation Working Group should promptly guide the fund management company to revise the valuation method.