"Capable of taking over land finance"! The formal implementation of asset inclusion, the era of industrialization of data elements begins

On August 21st, after 8 months of soliciting opinions, the Ministry of Finance officially released the "Provisional Regulations on Accounting Treatment of Enterprise Data Resources," which stipulates the scope of data resource recognition and accounting treatment principles, and will be implemented from January 1, 2024.

Data asset inclusion refers to recognizing data as an "asset" in the balance sheet of an enterprise, that is, including data assets in the balance sheet to reflect their true value and business contribution in the financial statements.

Guosheng Securities pointed out that with the official implementation of data asset inclusion, this will usher in a new era of industrialization of data elements.

According to calculations by Shenwan Hongyuan, under certain assumptions, only 1% of data in the entire industry can directly generate net profits of over 15 billion yuan through a single transaction, with manufacturing, retail, and finance ranking high due to a large amount of data resources.

Dongwu Securities believes that the potential total scale of the data asset market is hundreds of trillions of yuan and has the ability to replace land finance.

How are data assets included?

The "Provisional Regulations" further clarify the requirements for data resource disclosure. Among them, when enterprises use data resources to meet the requirements for intangible assets, they should amortize the expenses after providing services and recognize revenue; when selling data resources, they should meet the requirements for inventory, settle the expenses after the sale, and recognize revenue.

Guosheng Securities made the following analysis on the regulations in their August 21st research report:

Self-use is treated as an intangible asset, while transactional use is treated as inventory, appearing on the balance sheet or expansion.

1. According to the "Provisional Regulations," the items of "including: data resources" are added under inventory, intangible assets, and development expenditure projects, reflecting the book value of data resources or the expenditure amount that meets the capitalization conditions.

2. Data resources include three categories: purchased, self-developed, and acquired through other means. For intangible assets, the reporting period should disclose the book value, accumulated amortization, impairment provision, and book value. For inventory, the reporting period should disclose the book value, provision for inventory depreciation, and book value.

"Mandatory disclosure combined with voluntary disclosure," adopting the "future applicable law."

1. In addition to including data resources as assets such as intangible assets and inventory, enterprises can voluntarily disclose the application scenarios or business models of data resources, the type and scale of original data, processing, maintenance, and security protection, and the application of products based on the actual situation.

2. At the same time, enterprises should apply the future applicable law to implement these regulations, and the data resource-related expenses that have been expensed and included in the income statement before the implementation of these regulations will no longer be adjusted.

The report believes that:

"Inclusion means that data has completed the transition from natural resources to economic assets. As the first production factor in the digital economy era, data is expected to become an important support for government and corporate financial statements and revenue. Subsequent progress in data element rights confirmation, pricing, trading, circulation, revenue distribution, and pilot projects is expected to be gradually launched."

How big is the market space?

Dongwu Securities believes in their research report that the potential total scale of the data asset market is hundreds of trillions of yuan and has the ability to replace land finance. According to relevant estimates, the total scale of the national data asset market is 8.6 trillion yuan, which will drive the potential digitalization benefits of related industries to reach 34.4 trillion yuan. In addition, when data asset derivative markets are taken into account, the potential total scale may exceed 60 trillion yuan. Furthermore, according to domestic institutions, they believe that the data asset market could potentially reach a scale close to one quadrillion yuan.

We believe that as a market worth trillions of yuan, data assets have sufficient capital driving force to take over the banner of land finance (a market worth nearly one quadrillion yuan). In the long run, data elements will open a strategic door for the next 30 years of golden development.

Among them, Dongwu Securities predicts that the commercial value and market space of medical insurance data elements are significant, with a market space of nearly hundreds of billions of yuan for traffic data elements.

The specific report states:

"Medical insurance data has enormous value in clinical diagnosis and treatment, medical technology innovation, medical insurance, and patients. Medical insurance data has a rich dimension. With the continuous advancement of policies, we expect that the medical insurance data element market will be the first to be tested and become the first data element to be opened up.

According to our calculations, commercial insurance companies' annual data service fees will reach 55.4 billion yuan, and the market space brought by market research from pharmaceutical and medical device companies will be at least 10.6 billion yuan. Financial institutions' use of medical insurance data service fees will reach 18.7 billion yuan. In the future, with the expansion of applications such as intelligent disease screening and health management in the field of big health, the market space for medical insurance data applications will exceed hundreds of billions of yuan.

The transportation sector has a large volume and a wide variety of data, including high-speed big data, vehicle big data, ETC big data, transportation capacity big data, transportation administration big data, Beidou big data, etc. According to our calculations, the relevant expenses for purchasing data by auto insurance and automotive finance companies will reach 81.7 billion yuan, and the market size of data service applications for automobile companies is expected to be 14.95 billion yuan."

Shenwan Hongyuan Securities: "Data Finance" Gradually Replacing "Land Finance"

Shenwan Hongyuan Securities pointed out in its research report that the "Interim Provisions" took an important step without breaking the current accounting policies and principles. In the future, the importance of disclosing data business scenarios and creating value for enterprises will significantly increase, which will promote more companies to enter the path of data element development.

The report states:

The disclosure required by the Interim Provisions includes: the application scenarios or business models of data resources, the ways in which they impact the value creation of enterprises, and the macroeconomic and industry prospects related to data resource application scenarios.

In addition to the scenarios, more related disclosure information includes: (1) the type, scale, source, ownership, and quality of original data; (2) the processing, maintenance, and security protection of data resources by enterprises, as well as the possession and investment of related talents and key technologies; (3) the pricing, circulation, transaction, and service billing methods of data resource-related products or services.

The report mentioned that Shenwan Hongyuan Securities proposed the gradual replacement of "Data Finance" for "Land Finance" in February 2023, and pointed out that data now has regional attributes for the first time. In this disclosure information, the Ministry of Finance mentioned the concept of data regions. The key disclosure includes "restrictions on rights such as data resource transfer, licensing or application, territorial limitations, domain limitations, and legal and regulatory restrictions."

So, how much impact does the long-term inclusion of data resources have on the circulation of data in the entire industry?

According to the analysis report by Dolphin Research on "Which industries are expected to bring asset revaluation through data transactions? - Dolphin Research Strategy Digital Special Series on Data Transaction Pricing," assuming: 1. 1% of industry data can be traded and we assume only one transaction in this calculation; 2. Each data has 30 attributes; 3. Based on factual data pricing standards. According to the calculation results, the net profit brought by the direct transaction of 1% of data in the entire industry can exceed 15 billion yuan. Manufacturing, retail, and finance rank high in terms of direct net profit due to a large amount of data resources and the potential of data transactions for the industry.

At the same time, the report calculates the asset revaluation of the entire industry based on data:

1. Assuming that the net profit from data transactions in major industries is allocated according to the revenue proportion of Shenwan's first-level industries; 2. The data growth rate is based on the data volume forecast published by IDC. Through calculation, we can see that the industries with the highest revenue brought by data transactions are commerce and retail, banking, automotive, non-banking finance, and electronics.

Based on the calculation of the estimated net profit from data asset revaluation in 2030 divided by the industry's net profit in 2020, the industries that are expected to benefit from data asset revaluation are social services, media, commerce and retail, textile and apparel, transportation, computer, automotive, communication, electronics, and beauty care.

CITIC Securities: Key beneficiaries are operators and the digital economy industry chain

CITIC Securities stated in its latest research report that the leading and supporting role of China's digital economy in economic and social development is increasingly prominent. The value of data as a key production factor is becoming more prominent. The accelerated promotion of relevant policies will bring significant impetus to the rapid development of the digital economy and industry chain.

CITIC Securities believes that with the gradual improvement of policies related to the digital economy and data elements, data owners represented by operators and the digital economy industry chain are expected to continue to benefit.

Specifically:

"Operators hold massive data, covering multidimensional data of different regions and different groups, and the data volume continues to grow. If relevant data resources are included, it is expected to further increase the assets of operators, dilute their costs, and promote the improvement of their data monetization capabilities."