What does unrealized insider trading gain and loss mean?

Unrealized gains or losses on insider transactions refer to the use of the equity method.

In the case of cost accounting, there is an accounting treatment in which the parent company sells goods to a subsidiary or the subsidiary sells goods to the parent company.

For this kind of transaction, it is an internal transaction, and it is only when the goods are sold to a third party outside the group that it is deemed to be a sale.

It has been achieved. If there are no sales, it is an unrealized gain or loss on internal transactions.

With regard to the profit and loss of internal transactions, before the implementation of the new accounting standards, China only standardized the internal transactions between the parent company and its subsidiaries, and the offsetting of unrealized gains and losses was all adjusted to the consolidated net profit. At that time, due to the influence of the parent company theory, the profit and loss of minority shareholders were deducted from the calculation of consolidated net profit.

Therefore, the set-off of unrealized gains and losses will not affect the profits and losses of minority shareholders; And for investment companies and associates.

and the treatment of unrealized gains and losses in internal transactions between joint ventures has not been regulated.

When the equity method or cost method is used for accounting, there will be accounting treatment in which the parent company sells the goods to the subsidiary or the subsidiary sells the goods to the parent company. For this kind of transaction, it is an internal transaction, and only when the goods are sold to a third party outside the group will the sale be deemed to have been realized. If there are no sales, it is an unrealized gain or loss on internal transactions.

Unrealized gains and losses from internal transactions mean that the parent company and its subsidiaries are independent legal entities, and when there is an inventory sale between them, the sales profit is recognized on the books of the selling company.

or loss. For the adoption of the equity method.

Or the cost method.

When accounting is carried out, there is an accounting treatment in which the parent company sells goods to a subsidiary or the subsidiary sells goods to the parent company, and for this kind of transaction, it is an internal transaction. From the perspective of the enterprise group, as long as the inventory of internal transactions has not been transferred to the outside world, it has not been realized, and the profit and loss are overcounted.

For investment companies and their associates.

and unrealized gains and losses on internal transactions between joint ventures should be set off. That is, the unrealized gains and losses from internal transactions between the investment enterprise and the associated enterprises and joint ventures shall be offset by the part attributable to the investment enterprise calculated according to the proportion of shareholdings, and the investment gains and losses shall be recognized on this basis.

The unrealized gains and losses on internal sales included in the value of inventories are quietly caused by the purchase and sale of goods and the provision of services within the enterprise group. The main explanations are as follows: In the internal purchase and sales activities, the sales enterprise recognizes the group's internal sales as revenue and calculates the sales profit.

The purchasing enterprise is recorded as its cost by paying the purchase price; When the ending inventory is formed due to the unrealized external sales during the current period, the inventory value also includes two parts: one part is the real inventory cost (i.e., the cost of the selling enterprise selling the commodity); The other part is the gross profit of the sales enterprise (i.e., its sales revenue).

Subtract the cost of sales.

of the difference). The gross profit from sales included in the value of the inventory at the end of the period is not a real profit from the perspective of the enterprise group as a whole. This is because from the perspective of the enterprise group as a whole, the purchase and sale of commodities between enterprises within the group is actually equivalent to the internal material allocation activities of enterprises, which will neither realize profits nor increase the value of commodities.

It is in this sense that the part of the sales enterprise slag industry included in the value of the inventory at the end of the period is regarded as the part of profit recognition, which is called unrealized internal sales profit or loss. Therefore, in the preparation of the consolidated balance sheet, the unrealized gains and losses on internal sales included in the value of inventories should be set off.

Because after the transaction profit and loss are offset, there will be no profit or loss change for both parties in the internal transaction between A and B.

Unrealized internal gains and losses mainly exist in the internal inventory transactions between the parent company and the subsidiary. From the point of view of tax law, corporate income tax.

According to the accounting profit of individual statements as the basis of tax payment, when the internal transaction does not realize external sales, the accounting profit at the consolidated level is lower than the taxable income recognized by the wide grip tax law.

That is, the tax is undercalculated in accounting and the tax is overpaid in the tax law, resulting in a tax difference, which will reduce the taxable income during the reversal period when the inventory is sold to the outside world in the future period, and then reduce the income tax payable in the future period, so the unrealized internal profit or loss is a deductible temporary difference.

Introduction to Insider Trading Gains and Losses:

From the perspective of the balance sheet debt method, that is, the tax basis of inventories at the individual statement level.

is $1,000,000, the carrying amount of the inventory after consolidation and offset.

is 800,000 yuan, that is, the tax basis of the asset (individual level: 1 million yuan) is higher than the value of the account (consolidated level: 800,000 yuan), forming a deductible temporary difference.

According to the Accounting Standards for Business Enterprises.

If the following conditions are met at the same time, the corresponding deferred tax assets shall be recognized.

Temporary differences are likely to turn back in the foreseeable future; It is likely that taxable income will be obtained in the future to offset the deductible temporary difference. Pi Zhao.

It mainly refers to downstream trading and counter-current trading, and downstream trading refers to the investment enterprise to its associate or joint venture** asset counter-current transaction refers to the assets of the associate enterprise or joint venture to the investment enterprise. When the unrealized gains or losses from internal transactions are reflected in the carrying amount of the assets held by the investment enterprise or its associates, the relevant gains and losses shall be offset when calculating and recognizing the investment gains and losses.

Unrealized internal gains and losses mainly exist in the internal inventory transactions between the parent company and the subsidiary. Unrealized gains and losses arising from the sale of goods within an enterprise group, or between subsidiaries, that have not been made to the outside world at the end of the period.

For example, there are also internal and external forces in physics, and internal forces do not have an impact on the outside world. Secondly, the same is true in accounting, transactions or events that occur within the group should not be recorded in the consolidated financial statements.

When the equity method or the cost method is used for accounting, there will be accounting treatment in which the parent company sells the goods to the subsidiary or the subsidiary sells the goods to the parent company. For this kind of transaction, it is an internal transaction, and only when the goods are sold to the third short seller outside the group will the sale be deemed to have been realized. If there are no sales, it is an unrealized gain or loss on internal transactions.