Core Insights - Government subsidies are non-repayable financial aids provided to companies, which can be monetary or non-monetary assets, aimed at supporting development, technological upgrades, or addressing specific operational challenges [1][2] - Understanding the nature and accounting treatment of government subsidies is crucial for accurately assessing a company's true profitability and ongoing viability [1] Summary by Categories Nature of Government Subsidies - Government subsidies are classified into two main categories: asset-related subsidies and income-related subsidies [1] - Asset-related subsidies are funds used for acquiring or constructing long-term assets, such as new factories or environmental equipment, and are amortized over time rather than recognized as immediate profit [1] - Income-related subsidies are provided to compensate for incurred or anticipated expenses or losses, such as wage subsidies or operational support during crises, and are directly included in current profits [1] Impact on Profitability - The recognition of income-related subsidies can significantly boost current profits, but reliance on such subsidies may indicate weak core business profitability [1][2] - When analyzing a company's earnings quality, it is essential to exclude the impact of non-recurring government subsidies and focus on net profit after removing these non-recurring gains [2] Long-term Considerations - Companies should aim for growth through their operational capabilities rather than depending on external financial support [2] - A rational perspective on government subsidies can help investors better identify a company's intrinsic value [2]