1. Loan interest, including interest generated by enterprises borrowing from banks or other financial institutions, interest generated by issuing corporate bonds and interest-bearing debts incurred for purchasing, constructing or producing assets that meet capitalization conditions;

2. Amortization of discount or premium, including the amortization amount of discount or premium of each corporate bond;

3. Auxiliary expenses, including handling fees, commissions, printing fees and other transaction expenses incurred by the enterprise in the process of borrowing;

4. The exchange difference arising from foreign currency borrowing refers to the difference between the market exchange rate and the book exchange rate due to exchange rate changes, which has an impact on the amount of the bookkeeping base currency of the principal and interest of foreign currency borrowing.

Principles for handling loan expenses

1. Confirmation Principle The basic principle for the confirmation of borrowing costs is that if the borrowing costs incurred by an enterprise can be directly attributed to the purchase, construction or production of assets that meet the capitalization conditions, they should be capitalized and included in the cost of related assets, and other borrowing costs should be recognized as expenses according to the amount incurred and included in the current profits and losses.

2. The borrowing scope, that is, the borrowing cost, should be capitalized. Borrowing expenses should be capitalized, including special loans and general loans. Special loans are special loans issued for the purchase, construction or production of assets eligible for capitalization. Only when the purchase, construction or production of assets that meet the capitalization conditions occupy general loans should the borrowing costs related to this part of general loans be capitalized, otherwise the borrowing costs incurred should be included in the current profits and losses.

3. To determine the capitalization period of borrowing costs, only relevant borrowing costs incurred during the capitalization period can be capitalized. The capitalization period of borrowing costs is from the beginning of borrowing costs to the end of capitalization, but it does not include the suspension period of borrowing costs. Details are as follows:

(1) When borrowing costs are capitalized, three conditions must be met at the same time to allow borrowing costs to start capitalization, that is, asset expenditure has occurred, borrowing costs have occurred, and the purchase, construction or production activities necessary to make assets available or marketable have started.

(2) When the capitalization of borrowing costs is suspended, the capitalization of borrowing costs shall be suspended if the assets that meet the capitalization conditions are abnormally interrupted for more than 3 months in the process of purchase, construction or production. The reason of interruption must be abnormal interruption, which belongs to normal interruption, and the relevant borrowing costs can still be capitalized.

(3) When the capitalization of borrowing costs stops, if the borrowing costs incurred by the enterprise can be directly attributed to the purchase, construction or production of assets that meet the capitalization conditions, they should be capitalized and included in the cost of assets that meet the capitalization conditions. Other borrowing costs are recognized as financial expenses according to the amount at the time of occurrence and included in the current profit and loss. Assets eligible for capitalization refer to fixed assets, investment real estate, inventories, and other assets that need a long period of purchase, construction or production activities to reach the predetermined usable or saleable state.

Legal basis: Article 667 of the Civil Code of People's Republic of China (PRC).

A loan contract is a contract in which the borrower borrows money from the lender, repays the loan at maturity and pays interest.

Article 668

A loan contract shall be in written form, unless otherwise agreed between natural persons.

The contents of a loan contract generally include terms such as loan type, currency, purpose, amount, interest rate, term and repayment method.