The issue of long term equity investment accounted for by the equity method is urgent!!

This is to confirm the temporary difference, which is clearly recorded in the book "Accounting" for the CPA exam, and the original text is transcribed to you as follows:

In general, the corresponding deferred income tax liabilities should be recognized for taxable temporary differences related to the investment of associates and joint ventures, unless the following two conditions are met at the same time: first, the investment enterprise can control the time for the reversal of the temporary differences; Second, it is likely that the temporary difference will not be reversed in the foreseeable future. When the above conditions are met, the investor can use its influence to determine the reversal of the temporary difference, and if it does not want it to be reversed, the temporary difference will not be reversed in the foreseeable future, so that the corresponding deferred tax liability is not recognized.

In other words, when the investee enterprise realizes net profit, and the income tax rate of the investee enterprise is different from that of the investee enterprise, it is necessary to pay income tax due to the inability to control the dividends of the investee enterprise, and the income tax liability should be recognized at this time.

Absolutely. When the equity method is adopted, the investment enterprise must recognize the investment income according to the proportion, but the tax calculation needs to wait until the enterprise receives the dividends before recognizing, so the taxable income will increase in the subsequent period.

This is a case where the future taxable income is greater than the future pre-tax accounting income.

In the future, please add more points correctly, otherwise you will not be able to attract people who really understand and will be misled.

The accounting and tax basis are the same, and there are no temporary differences in taxability.

The accounting standards for long-term equity investments are no different from those stipulated in the tax law.

1) Obtain long-term equity investment.

Borrow: Long-term equity investment - cost.

Loan: Bank deposits.

Note: If the initial investment cost of a long-term equity investment is less than the fair value share of the investee's identifiable net assets at the time of investment, the "long-term equity investment - cost" account shall be credited to the account of "bank deposits", and the account of "non-operating income" shall be credited according to the difference.

2) The net profit or net loss of the investee during the period of holding long-term equity investment) is calculated according to the net profit realized by the investment unit, and the share of the investment unit is borrowed: long-term equity investment - profit and loss adjustment.

Credit: Investment income.

2) Incurred a net loss, borrowed: investment income.

Credit: Long-term Equity Investment - Profit and Loss Adjustment.

2. When the investee declares the distribution of cash dividends or profits in the future, it borrows: dividends receivable.

Credit: Long-term Equity Investment - Profit and Loss Adjustment.

3. When receiving the cash dividends declared by the investee, borrow: bank deposits.

Credit: Dividends receivable.

3) Other changes in the owner's equity of the investee during the period of holding long-term equity investment: long-term equity investment - changes in other equity.

Credit: Capital Reserve - Other Capital Reserve.

4) Disposal of long-term equity investment.

Borrow: Bank deposit.

Credit: Long-term Equity Investment - Cost.

Profit and loss adjustments Changes in other equity.

Return on investment at the same time:

Borrow: Capital Reserve - Other Capital Reserve Enlightenment.

Credit: Investment income.

The equity method is used to account for the trembling imitation:

At the time of acquisition: when the initial investment cost is greater than the investee's identifiable fair value share at the time of investment, borrow: long-term equity investment - cost, credit: bank deposit, and when the initial investment cost is less than the investee's identifiable fair value share at the time of investment:

Borrow: Long-term equity investment - cost (Ying Dongqin enjoys the identifiable fair value share of the investee), credit: bank deposits, non-operating income (difference), holding period:

Net profit of the investee:

Borrow: Long-term Equity Investment - Profit and Loss Adjustment, Credit: Investment Income, Net Loss of Investee:

Borrow: Investment income, Credit: Long-term equity investment - profit and loss adjustment (limited to the book value of the long-term equity investment written down to zero), the investee later declares the payment of cash dividends or profits:

Borrow: Dividends Receivable, Credit: Long-Term Equity Investments - Profit and Loss Adjustments or Costs, Other Changes in Investee Owners' Equity:

Borrow: Long-term equity investment - change in other equity, Credit: capital reserve - other capital reserve (or vice versa), when disposed of, borrow:

Bank deposits, impairment charges for long-term equity investments (as provided for impairment), credit: long-term equity investments – costs, profit and loss adjustments (or debits), changes in other equity (or debits).

Dividends receivable (not yet claimed), investment income (shortfall, or debit).

Borrow: Capital Reserve - Other Capital Reserve, Credit: Investment Income (or vice versa).

Legal analysis: If the long-term equity investment is accounted for by the equity method, it shall be accounted for in detail under the "investment cost", "profit and loss adjustment", "other comprehensive income" and "other equity changes".

Legal basis: Article 27 of the Company Law of the People's Republic of China Shareholders may make capital contributions in monetary terms, as well as non-monetary assets that can be valued in monetary terms and can be transferred in accordance with the law, such as physical objects, intellectual property rights, land use rights, etc.; However, there is an exception for property that is not allowed to be used as capital contribution as stipulated by laws and administrative regulations. The non-monetary property used as capital contribution shall be appraised and verified, and the property shall not be overvalued or undervalued.

Where laws and administrative regulations have provisions on appraisal valuation, follow those provisions.

1.Scope of application:

The long-term equity investment in which the investment enterprise has common control or significant influence on the investee is accounted for by the equity method, that is, the equity method is applicable to:

investment in associates;

Investment in joint ventures.

2.Accounting Treatment:

Adjustments to the initial investment cost.

After the investment entity obtains a long-term equity investment, if the investee realizes a profit or incurs a loss, which is directly reflected in the increase or decrease of its owner's equity, the investment entity shall recognize the share of the net profit or loss realized by the investee (except for the net profit or loss that is not part of the investment enterprise as stipulated by laws and regulations or the articles of association) and adjust the book value of the long-term equity investment. The specific entries are:

Borrow: Long-term equity investment - profit and loss adjustment.

Credit: Investment income.

Or make the opposite entry.

The treatment of profits or cash dividends declared by the investee.

The cash dividends or profits obtained by the investment enterprise from the investee shall be offset against the book value of the long-term equity investment; The cash dividends or profits obtained from the investee in excess of the recognized profit or loss adjustment shall be deemed to be the recovery of investment costs and the carrying amount of the long-term equity investment shall be reduced.

Borrow: Dividends receivable.

Credit: Long-term Equity Investment - Profit and Loss Adjustment.

Other comprehensive income realized by the investee.

The investing enterprise should adjust the book value of the long-term equity investment according to the share of other comprehensive income realized by the investee.

Borrow: Long-term equity investment - other comprehensive income.

Credit: Other comprehensive income.

Other changes in owner's equity (changes in capital reserve) realized by the investee in addition to net profit or loss, other comprehensive income and profit distribution

For the increase in capital premium due to capital increase and share expansion, the investment enterprise shall adjust the increase or decrease the book value of the long-term equity investment and increase or decrease the capital reserve (other capital reserve) according to the share it enjoys.

Borrow: Long-term equity investment - other equity changes.

Credit: Capital Reserve - Other Capital Reserve.

Or make the opposite entry.