Ministry of Finance intervenes! This organization suspends operations for half a year

Recently, the Ministry of Finance issued an administrative penalty decision.

During the inspection, it was found that Beijing Baihui Fangxing Asset Appraisal Co., Ltd. signed asset appraisal reports under the names of asset appraisers for businesses that were not actually handled in substance, and subcontracted the asset appraisal projects to enterprises and individual industrial and commercial households without appraisal qualifications for issues such as “comprehensive appraisal services,” among others. The Ministry of Finance decided to issue a warning to the company, order it to suspend business for six months, and confiscate and impose penalties on its business income.

Signed Under an Appraiser Name for Business Not Actually Handled in Substance

Pursuant to laws and regulations including the Asset Appraisal Law of the People’s Republic of China, the Ministry of Finance organized an inspection team in 2025 to conduct an inspection of the company’s practice quality and related matters. The inspection found some problems.

First, the asset appraisal report No. Beijing Baihui Fangxing Appraisal Report (2024) No. A-269 had multiple issues. When calculating cash flows, fixed-asset investment in the construction projects corresponding to the new-energy charge-and-swap operation rights—amounting to RMB 1.607 billion—should have been deducted but was not. This error led to a serious overstatement of the appraisal conclusion. The company did not distinguish the income obtained for intangible assets from that obtained for other assets. The company’s asset appraisal professionals classified all expected returns generated by the new-energy charge-and-swap construction projects entirely as income obtained from intangible assets.

Second, the asset appraisal report No. Beijing Baihui Fangxing Appraisal (2024) No. D-1084 had certain issues. The purpose of this report’s appraisal was asset impairment testing, and the correct type of value should be the “recoverable amount.” The company’s asset appraisal professionals selected “market value” as the value type, which does not match the appraisal purpose, and, where the appraisal result was lower than the carrying amount, failed to further calculate using another method in accordance with the relevant standards and compare it with the carrying amount.

Asset impairment testing appraisal should use the present value of estimated future cash flows or fair value minus disposal costs to calculate the recoverable amount of an asset. However, the company’s asset appraisal professionals used “free cash flow to the firm” to calculate the recoverable amount, which does not comply with the relevant provisions for asset impairment testing appraisal.

Errors in the calculation of future capital expenditures caused a difference amount of RMB 49.479 million (under unchanged other conditions, resulting in an understatement), with a difference rate of 12.16%.

Third, the company signed the asset appraisal reports for asset appraisal business that it did not actually handle in substance using the name of an asset appraiser. In 2024, the company signed asset appraisal reports for businesses not actually handled in substance under the names of three asset appraisers, including Li [surname] (3 persons). In total, this involved 37 appraisal reports, with total fees of RMB 1.5722 million.

Finally, the company entrusted its asset appraisal projects to enterprises and individual industrial and commercial households without appraisal qualifications. The company separately entrusted six asset appraisal projects to two enterprises without appraisal qualifications (involving 3 projects; the company charged RMB 0.65 million and paid entrusted fees of RMB 0.52 million) and to one individual industrial and commercial household (involving 3 projects; the company charged RMB 0.75 million and paid entrusted fees of RMB 0.75 million) to conduct “comprehensive appraisal services.”

The Ministry of Finance stated that the above facts are evidenced by materials such as the inspection report, inspection working papers, the parties’ attestations and the feedback opinions.

Business Suspended for Six Months

Pursuant to Article 46 of the Measures for Financial Supervision and Administration of the Asset Appraisal Industry, the Ministry of Finance determined that the above matters do not comply with Article 8, items 1 and 2 of the Basic Standards for Asset Appraisal, Article 6 and Article 22, item 2 of the Asset Appraisal Practice Standards—Intangible Assets, Article 5, Article 18, Article 19, item 1, item 1 of the Appraisal Guide for Purposes of Financial Reporting, and constitute a major omission, in violation of provisions including Article 20, item 6 of the Asset Appraisal Law of the People’s Republic of China.

Pursuant to Article 20, item 7 and Article 27, paragraph 1 of the Asset Appraisal Law of the People’s Republic of China, the Ministry of Finance determined that the company’s signing 37 asset appraisal reports under the name of asset appraisers for businesses not actually handled in substance falls under the conduct of “employing or designating persons not complying with the provisions of this Law to engage in appraisal business.”

Pursuant to Article 20, item 7 of the Asset Appraisal Law of the People’s Republic of China, the Ministry of Finance determined that the company’s entrusting six asset appraisal projects to two enterprises without appraisal qualifications and one individual industrial and commercial household for “comprehensive appraisal services” falls under the conduct of “employing or designating persons not complying with the provisions of this Law to engage in appraisal business.”

Pursuant to Article 47, paragraph 1, items 6 and 8 of the Asset Appraisal Law of the People’s Republic of China, the Ministry of Finance decided to impose the following administrative penalties on the company: issue a warning, order it to suspend business for six months; confiscate illegal gains from the project of Report No. A-269 totaling RMB 146,700 and impose a fine of RMB 440,000; confiscate illegal gains from the 37 asset appraisal reports (including Report No. D-1084) signed under the name of asset appraisers for businesses not actually handled in substance totaling RMB 1.5722 million and impose a fine of RMB 4.7166 million; confiscate illegal gains from the asset appraisal projects involving six projects entrusted to enterprises and individual industrial and commercial households without appraisal qualifications totaling RMB 1.4 million and impose a fine of RMB 4.2 million.

Layout: Wang Yunpeng

Proofread: Pan Da