The Accounting Study On The Rights To Use A Site

The rights to use a site are separated from the ownership of a site, which an enterprise can make use of to obtain income in some time. In our country, the ownership of the land belongs to the nation, and enterprises only have the rights to use some sites. But in the west, the enterprise owns its sites. Consequently, there are some differences on accounting between our country and the western countries because of the dissimilarity of the property ownership. In the west, enterprises regard the sites as fixed assets and don't depreciate for their infinite profitable period. But in our country, enterprises regard them as intangible assets and depreciate them in their profitable period for their finite occupation, and the rights to use a site for leasing will be regarded as investment property of the lessor after the Chinese Accounting Standards No.3—Investment Property is brought into effect.There are three ways to obtain the rights to use a site in our country: to buy from the government, to obtain as capital stock or to get from leasing, and different way has different finance influence on the enterprises. Enterprise which buy the rights to use sites from the government have more independency, for they can turn it to be on sale, rent, mortgage etc, and be helpful to the application of the assets. Since the rights got by the first way above always has long valid period, and its costs are usually substantive and paid at one time, it will affect the capital liquidity and the refund capacity of the enterprise. The rights got by the second way above that can lower the property liabilities rate of the enterprise, but it also lower the net income to net assets ratio and the other shareholders' income of the enterprise. The enterprise needn't pay substantive costs to get the rights to use a site by the third way above. Also it will not enlarge the weight of the state-owned share in the enterprise and the rights needn't be treated as an item of intangible assets in the balance sheet. Thus for the reasons before-mentioned, the enterprise have the obviously economic motive buy the choice of way to get the rights to use a site. The company which adopts the first way usually has higher cash to liability ratio, so it requires the cash flow of the company to be more abundant. The company which adopts the second way always has a higher net income to net assets ratio. The company that has a higher propertyliabilities rate, a lower net income to net assets ratio and lower cash to liability ratio, prefer to choose the third way. So the discussions before-mentioned, eventually lead to the lower relativity of accounting information provided by financial reports. And it also brings about disadvantageous influence on the decisions of the information users inevitably.Therefore, the research on the accounting of the rights to use a site must be perfected. This article will put forward some suggestions on the accounting disposal and disclosure of the rights to use a site mainly according to the datum of our country's companies come into the market. Otherwise, the author has put forward some suggestions on the accounting disposal of rights to use a site in collectivity, aiming at the specification of the rights to use a site in rural area.