What is Unearned Interest?
Uncollected interest receivable refers to the amount of unreceivable interest receivable in the current period after a financial institution issues a loan to a borrower. Those included in the profit and loss account are unreceivable interest receivable on-balance sheet and those not included are unreceivable interest receivable off-balance sheet.
Unreceivable interest receivable
Right!
- Chinese name
- Unreceivable interest receivable
- Foreign name
- Interest receivable
- Regulations
- Bank of China loans overdue for less than two years
- Time
- Before 1998
- Uncollected interest receivable refers to the amount of unreceivable interest receivable in the current period after a financial institution issues a loan to a borrower. Those included in the profit and loss account are unreceivable interest receivable on-balance sheet and those not included are unreceivable interest receivable off-balance sheet.
- Before 1998, China's bank loans were overdue for less than two years, and the interest that was receivable according to the prescribed interest rate but not received was included in the profit and loss account. If it was more than two years, it was not included in the profit and loss account and was accounted for. Although the uncollected interest receivable in the table is not received, it must be included in the current operating income and pay business tax. At the same time, false profits due to falsely increased business income are subject to income tax. Financial institutions actually give out a portion of credit funds. Tax advances have caused potential losses and operating risks for financial institutions. In order to prevent and resolve financial risks and improve business management, the Ministry of Finance in 1998 changed the accounting period for uncollected interest receivables to profit and loss to one year, from 2000 to half a year. At the same time, it stipulated that Uncollected interest that cannot be recovered for three consecutive years can be written off as bad debts.
- In 2001, it was also stipulated that after the loan principal or interest receivable that has been included in profit or loss is overdue for 180 days (excluding 180 days), financial enterprises shall deal with interest income accordingly. For unreceivable interest receivable that is included in profit or loss before December 31, 2000, financial companies may gradually reduce interest income based on their own operating conditions, but in principle shall not exceed 5 years. At the same time, it no longer draws bad debt reserves and ceases to implement the policy for writing off bad debts. This is basically in line with international practice (generally, loans that are overdue for 90 days or half a year are unreceivable interest receivable as current income).
- The interest rate receivable and unreceivable in the current period is to reveal the interest receivable of the loan but not yet recovered. It does not include the interest income of entrusted loans, which refers to the reference value of the ratio of the unreceivable interest receivable to the current period's interest income.
- Interest rate receivable for the period = Interest receivable for the period / Interest income for the period × 100