Conversion on subsequent measurement methods on long-term equity investment（长期股权投资后续计量方法的转换）

1、 Conversion on subsequent measurement methods on long-term equity investment Abstract: Long-term equity investment is the investment based on its investment strategy on the target unit, while the formation of a financial asset to the interests of the target unit occupies an important position in the

2、 long-term equity investments in business investment. In the long-term equity investment accounting, cost method and equity method of conversion is difficult and is also a key, if not properly handle the follow-up measurement of the conversion of long-term equity investment, it may become corporate

3、profit manipulation means .2010 accounting standards on long-term equity investment part of re-modified, modified contrast to the previous accounting treatment of long-term equity investment more intelligibility, and more convergence with international accounting standards. Keywords: long-term equit

4、y investment, the cost method, equity method Abstracts: Long-term equity investment that based on a companys investment strategy is to target investment units while format a kind of financial assets of the rights of the target unit. Long-term equity investment plays an important role in business inv

5、estment. The accounting treatment of long-term equity investments including the initial measurement follow-up measurement method for long-term equity investment which account for the conversion and disposal of contents. Long-term equity investment has two critical methods including cost method and e

6、quity method and the conversion of these two methods is a key difficult.If can not correctly solve this problem it may become a means to manipulate profits. Accounting standards on the part of the long-term equity investments made important pro-modified with long-term equity investments in the revis

7、ed accounting treatment. for compared with the old standards the revised one is more comprehensive and more converge with international accounting standards. Keywords: long-term equity investment; the cost method; the equity method I. Introduction Long-term equity investment based on its investment

8、strategy on the target unit, while the formation of a financial asset to the interests of the target unit occupies an important position in the long-term equity investments in business investment, in accordance with the investment share of the investment unit of the investment unit of different size

9、s in order to have investment interests, the subsequent measurement of long-term equity investment is divided into the cost method and equity method investment is made, if the investment unit to control the financial and operating policies of the investee, or investment units unit investment of less

10、 than control, joint control or significant influence over the investment in the market quoted price fair value can not be reliably measured, then the subsequent measurement of the long-term equity investments should be accounted for using the cost method, in addition, the investment unit the subseq

11、uent measurement of long-term equity investment should be using the equity method. Of course, during the holding of investment, the investment unit due to the influence of various factors to expand the investment share of the investee, or the sale of the investment units of investment due to change

12、the share of investment to the investors thus changing the invested entity has an interest, so investors subsequent measurement of the conversion of long-term equity investment. If you made the investment, the investor does not properly handle follow-up measurement methods for long-term equity inves

13、tment conversion of conversion, may become the means of corporate manipulation of profit, which malicious suspicion of manufacturing errors. correct handling of the subsequent measurement of the long-term equity investment is of great significance for enterprises. Second, the long-term equity invest

14、ment follow-up measurement method and its conversion Subsequent measurement of corporate long-term equity investment in two ways: the cost method and equity method. Cost method, the investment cost of the equity method, the investment after the initial investment cost, the investment holding period

15、according to the investment unit to enjoy changes in the investment of owners equity share are adjusted book value of the investment. When the investment of enterprises on investments in subsidiaries or business units of the investment less than control, joint control or significant influence, are n

16、ot quoted in an active market, fair value can not be reliably measured, long-term equity investments are subsequently measured at cost method is used accounting. subsequent measurement of investment in the formation of long-term equity investments accounted for using the equity method associates or

17、joint ventures. In the investment holding period, because of changes in all aspects of the situation, may lead to subsequent measurement methods for its investment in a way to convert to another method. Subsequent measurement of change in the method can be divided into the following four cases: (An

18、investment unit of additional investment stake rise, and subsequent measurement is converted by the cost method to equity method. The original holders, such as investment units 1% of the shares in the investee, the investee control, joint control or significant influence on the market offer fair val

19、ue can not be reliably measured, so the subsequent measurement using the cost method. Later, additional investment to 20 percent, have a significant impact on the investee, so the long-term equity investments are subsequently measured at cost method to the equity method of accounting. The original h

20、olders of the invested entity does not have control, joint control or significant influence, are not quoted in an active market, fair value can not be reliably measured long-term equity investments, due to additional investment led to the increase in its stake can exert significant part of the inves

21、tor influence or joint control, and cost method into the equity method, a distinction should be made between the two parts of the long-term equity investments as well as new long-term equity investment deal with: 1, the original holders of long-term equity investment balance and calculated according

22、 to the original stake should be determined to enjoy the original investments when the investment unit identified the difference between the fair value of net assets of the former than the latter, do not adjust long-term equity investment carrying value of the former than the latter, based on the di

23、fference to adjust the book value of long-term equity investment and retained earnings. 2, the equity part of the newly acquired, should compare the additional investment costs and made that part of the investment shall enjoy the investment unit share of the fair value of identifiable net assets of

24、the former than the latter, do not adjust the cost of long-term equity investment, the former less than the latter, according to the difference to adjust the long-term equity investment costs and current operating income. According to such adjustment, to be considered together with the original hold

25、ers of the investment and additional investment of goodwill or through profit or loss amount. 3 trading days between the initial investment to invest an additional investment of identifiable net assets at fair value changes relative to the original part of the stake belonging to the investment units

26、 during this period the share of net profit or loss shall enjoy On the one hand to adjust the carrying value of long-term equity investments, at the same time, when the original investments to invest an additional current at the beginning invested entity shall enjoy according to the original stake n

27、et profit or loss shall be adjusted against retained earnings, additional investment beginning of the period to an additional investment transactions should enjoy a net investment gains and losses through profit or loss are other causes of share of the investment unit of identifiable changes in fair

28、 value of net assets shall enjoy the book value of long-term equity investment At the same time, it should be included in the capital reserve - capital reserve. (Two investment units for the disposal of part of the investment holdings decline in the proportion of the subsequent measurement of the co

29、nversion by the cost method to equity method. The original holders of 60% of the shares in the investee such as investment units, and are subsequently measured at cost method is used to control the investee, it is the later sale of the business part of the investment, the investment share to 20%, wa

30、s The investment unit can not control but have a significant impact, therefore, the subsequent measurement of long-term equity investment by the cost method to the equity method of accounting. First shall dispose of the proportion of investments or disinvestments, the proportion of carried forward s

31、hall terminate recognized long-term equity investment costs. On this basis, it should be the remaining long-term equity investment cost and the original investment should be calculated in accordance with the remaining stake the investee can the fair value of identifiable net assets (equity method, w

32、e only recognize the value of a fair, that is, the acquisition date fair value, therefore, for the point of disposal or recovery of investment, the investees identifiable net assets at fair value has nothing to do with our , are part of the goodwill embodied in the investment valued at the same time

33、, does not adjust the carrying value of long-term yield estimation of investment and an investment cost is less than the original investment shall enjoy the cost of the investment unit of the identifiable net assets at fair value share, in the long-term equity investment should be adjusted against r

34、etained earnings. Original investments to the disposal of investment of the invested entity should enjoy the share of net profit or loss, on the one hand to adjust the book value of long-term equity investment, at the same time to the disposal of investment in the current period at the beginning of

35、the original investments invested entitys net gains and losses (net of issue and declaration of cash dividends and profits enjoyed a share of adjusted against retained earnings, the share of net profit or loss in invested entity in the disposal of investment beginning of the period to the date of di

36、sposal of investment shall enjoy, to adjust the current profit and loss other causes of changes in owners equity investment shall enjoy the share, at the same time of adjustment of the carrying value of long-term equity investment shall be credited to capital reserve - capital reserve. (Three invest

37、ment units due to additional investment reasons stake rise, and subsequent measurement is converted by the equity method to cost method. The original holders of 20% of the shares of the investee, such as investment units have a significant impact on the investee, the subsequent measurement using the

38、 equity method. Later, additional investment to 60% able to control the investees financial and production and management decision-making, subsequent measurement of the long-term equity investment by the equity method of conversion cost method. (D investment holdings decline in the proportion of uni

39、ts to recover part of the investment and subsequent measurement is converted by the equity method to cost method. The original holders of 20% of the shares of the investee, such as investment units have a significant impact on the investee, the subsequent measurement using the equity method. Later,

40、the sale of part of the investment, the share of investment fell 1%, was investment units amounted to less than control, joint control or significant influence on the market offer, the fair value can not be reliably measured, converted to the subsequent measurement of the long-term equity investment

41、 by the equity method to cost method. Among them, the first three subsequent measurement of the conversion of long-term equity investment, based on the importance of principles to be adjusted retrospectively and the fourth-invested enterprises to recover the investment, its share of investment in th

42、e investee smaller from the importance of point of view, invested enterprises investment in the investee is not important, so the conversion of the subsequent measurement methods do not have to retroactive adjustment. The following from these four cases illustrate the accounting treatment for subseq

43、uent measurement of long-term equity investment conversion. 3 illustrates the conversion cost method and equity method Example 1, Company A in 20 8 February 10% of the shares in Company B, the cost of $ 900 million on investment when Company B was the identifiable net assets at fair value amounted t

44、o 84 million yuan (assuming the same fair value and book value does not have a significant impact on the invested entity and can not reliably determine the fair value of investments, A company using the cost method of this example, Company A in accordance with net profit of 10% of surplus reserves.

45、January 10, 20 9 A company again the price of 18 million yuan to obtain 12% of the shares in Company B, the same day B Company identifiable net assets at fair value amounted to 120 million yuan made part of the shares, in accordance with the Company B Articles of Incorporation, Company A can send pe

46、ople to participate in Company Bs production and management decisions, the long-term equity investment into the equity method of accounting. Assume that Company A in obtaining the 10% stake in Company B to the new investment, the two sides did not occur to any internal transactions, a Company B prod

47、uction and business activities to achieve the net profit of 900 million, did not send a cash dividend or profit. Assume that without considering the other factors. Requirements: (a preparation of the January 10, Company A, 20 9 years, additional investment accounting treatment. (2 preparation of lon

48、g-term equity investment retrospective adjustments to the accounting treatment. By one: long-term equity investment in 1800 Loans: bank deposits, 1800 2 adjusted the book value of long-term equity investments for the original 10 percent stake in the cost of 900 million with the original investment s

49、hould the investees identifiable net assets at fair value share of 8.4 million yuan directly the difference of $ 600,000, belonging to the goodwill embodied in the original investment, the part of the difference to adjust the book value of long-term equity investment. For investment units to the ori

50、ginal investment 36 million yuan relative to the original stake and some of the $ 3.6 million (3600 10% of new investment deals between the change in fair value of identifiable net assets, which belong to the investment after the investment unit net profit of 900,000 yuan part (900 10% of book balan

51、ce should be adjusted to increase the long-term equity investment, while adjusting retained earnings, changes in the fair value of identifiable net assets of investment units in addition to achieve the net profit or loss from other causes 2.7 million should be added to adjust the book balance of the

52、 long-term equity investment, and included in “other capital surplus of the capital reserve. treated as the part of the investment accounts: By: long-term equity investment 360 Credit: Capital reserve - other capital surplus 270 Surplus reserves 9 Distribution of profits - the undistributed profits

53、81 For the newly acquired shares, the cost of 18 million yuan, calculated in accordance with the stake and made the investment should be determined to enjoy the difference between the share of the investees identifiable net assets at fair value 14,400,000 yuan (12,000 12% Goodwill reflects the inves

54、tment price of that portion of goodwill is not to adjust the cost of long-term equity investment. Example 2, Company A on January 1, 2009 to 75 million yuan of bank deposits made 60% of the shares in Company B, using the cost method Long-term equity investment in Company B on January 1 In 2009, the

55、identifiable net assets at fair value 10,000 million on investments at fair value and book value of investment units only a fixed assets are not equal, in addition to other identifiable assets, liabilities, book value and fair value equal to the value of fixed assets is 200 million yuan depreciation

56、 is 40 million yuan, Company B is expected useful life of 10 years, the net salvage value is 0, are depreciated on a straight-line method, A Company estimated the fair value of the fixed assets of 400 million, the remaining useful life of the Company A for eight years, the net salvage value is 0, a

57、straight-line depreciation is the accounting policies adopted by both sides, the same accounting period, without regard to income tax factors. assume that A and B, the company did not occur any internal transaction (the same control Business Combinations Company B in 2009 and 2010 associated with th

58、e investment of other related conditions are as follows: 2009 B company achieved net profit of 400 million, the changes in the fair value of available for sale financial assets of 60 million, distribution of stock dividends 2,000,000 B, .2010, the company achieved a net profit of 5 million yuan, 400,000 yuan available for sale financial assets at fair value changes, the distribution of cash dividend of 5 million yuan. A Company on January 1, 2011 to sell 20% of the shares in Company B, the sale price o