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Reporter Wu Junqiang reports from Beijing
The Ministry of Finance recently issued the Interim Provisions on Accounting Treatment of Securities Companies' Creation of Warrants, which clearly stipulates the accounting treatment of securities companies' creation of warrants.
According to the regulations, the securities companies shall register and settle the warrants issued by the securities companies in the central government at the end of the accounting period
The shares deposited in the special account of the Company for performance guarantee shall be measured at fair value, and the changes in fair value shall be included in investment income. The warrants issued by securities firms shall be measured at the middle price of the warrants, and the difference between the middle prices at the end of the two accounting periods shall be included in the profits of the current period. If the closing middle price of the warrant significantly deviates from the value calculated and determined according to the B-S option pricing model, the securities firm shall measure it according to the value determined by the B-S model.
For the put warrants issued by securities companies, they shall be measured at the middle price of the put warrants at the end of the accounting period, and the difference between the middle prices of the two accounting periods shall be included in the current profits and losses. If the closing middle price of the put warrant significantly deviates from the value calculated and determined by the B-S option pricing model, the securities firm shall measure it according to the value determined by the B-S model. For the call or put warrants created by the cancellation of the securities firm, the securities firm may record the difference between the amount received when the warrants are issued and the purchase price into the current profits. This provision does not provide quantitative indicators for securities companies to choose the middle price at the end of the period or the theoretical value when calculating the warrant income.
According to the statistics of Shanghai Stock Exchange, as of the end of last year, the number of warrants created by securities companies and still in circulation totaled 1.546 billion, including 908 million WISCO call warrants, 592 million WISCO put warrants and 46 million Guangzhou Airport warrants. The accounting treatment method of these warrants will directly affect the profits of securities companies in 2005.
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