Long term equity investment cost method to equity method

The cost method to the equity method needs to be adjusted retrospectively: 8000-5600=2400, of which 600 is due to the net profit of 600 in 07, and 1800 is caused by other reasons, so the entries are adjusted retroactively.

Borrow: Long-term equity investment 240

Credit: Surplus Reserve 6

Undistributed profit 54

Capital Reserve - Other Capital Reserve 180

The original goodwill of 600-560 = 40 is still positive goodwill after the capital increase, and it is still 1200-8000 * 12% = 240, so there is no need to adjust retroactively.

The cost of long-term equity investment = original 600 + capital increase 1200 + 240 = 2040 borrowing: long-term equity investment 1200

Credit: Bank deposit 1200

Equity ratio 10% + 12% = 22%.

Consolidated statements are a different story.

Company A's contribution of 600 plus is all the net investment costs. Equity ratio 10 + 12 = 23:100

1800-60 = 17.4 million to buy 23 shares of LaB Company.

Borrow: Long-term equity investment - cost 1200

Credit: Bank deposit 1200

8000*(10%+12%)=1760"1200+600=1800, no need to adjust the book value of long-term equity investment.

The cost amount of long-term equity investment after the change = 1200 + 600 = 1800 equity ratio = 22%.

The treatment of the consolidated statements of long-term equity investment from cost method to equity method.

The circumstances in which long-term equity accounting is changed from the cost method to the pre-right benefit method include: (1) the cost method is changed to the equity method because the increase in the shareholding ratio can exert significant influence or joint control on the investee; (2) The investee is no longer controlled due to the decline in the shareholding ratio, but can exert significant influence on the investee or jointly control the hidden potatoes, which is changed from the cost method to the equity method.

Note) However, according to the new accounting standards in 2015, an enterprise's investment in an enterprise that has no control, no common control and no significant influence is calculated according to the financial instruments standard, that is, it is included in the financial assets available for **.

1. The equity method is used to account for the investment at the time of acquisition, so the difference is included in the non-operating income (i.e., the profit or loss for the current period);

2. Additional investment to convert the cost method into the equity method; In the cost method, when it is greater than, no treatment is made; Converted to the equity method, it is necessary to adjust the previous cost method according to the accounting treatment of the equity method, because it is used as an operating spine income, because it is before the plastic matching negotiation, so the retained earnings are adjusted.

3. Borrow: bank deposit loan, long-term equity investment - ** company investment income.

Equity Conversion Method: Borrow: Long-term Equity Investment - **Company - Profit and Loss Adjustment Loan: Surplus Reserve - Statutory Surplus Reserve.

Profit distribution - undistributed profit investment income.

Borrow: Other comprehensive income.

Credit: Investment income.

Common accounting policies include:

1. Issue the measurement of inventory cost.

It refers to the accounting treatment used by the enterprise to determine the cost of inventory issued. For example, whether the cost of inventory issued is measured using the first-in, first-out method or other methods.

2. Follow-up measurement of long-term equity investment.

It refers to the accounting treatment after the enterprise obtains a long-term equity investment. For example, whether an enterprise's long-term equity investment in an investee is accounted for using the cost method or the equity method.

3. Follow-up measurement of investment real estate.

It refers to the accounting treatment adopted by Shenchun Enterprise for the subsequent measurement of investment real estate at the balance sheet date. For example, whether the subsequent measurement of investment real estate by an enterprise adopts a cost model or a fair value model.

4. Initial measurement of fixed assets.

It refers to the measurement of the initial cost of fixed assets acquired by an enterprise. For example, the initial cost of a fixed asset acquired by an enterprise is measured on the basis of the purchase price or the present value of the purchase price.

5. Recognition of intangible assets.

It refers to whether the expenditure on R&D projects is recognized as intangible assets. For example, whether the expenditure in the development stage of an internal R&D project is recognized as an intangible asset or included in the current profit or loss when incurred.

6. Measurement of the exchange of non-monetary assets.

It refers to the measurement of swapped assets in the exchange of non-monetary assets. For example, whether the fair value of the surrendered asset is used as the basis for determining the cost of the swapped asset or the carrying amount of the swapped asset as the basis for determining the cost of the swapped asset in a non-monetary asset exchange.

7. Recognition of income.

Refers to the accounting principles used for revenue recognition. For example, when a company recognizes revenue, it must meet the conditions that the main risks and rewards of ownership of the goods have been transferred to the purchaser, that the amount of income can be reliably measured, and that the relevant economic benefits are likely to flow into the enterprise.

8. Handling of borrowing costs.

It refers to the accounting treatment of borrowing costs, i.e., whether it is capitalized or expensed.

9. Merger Policy.

It refers to the principle of preparing consolidated financial statements. For example, the principle of treatment of inconsistencies between the accounting years of the parent company and the subsidiary; Principles for determining the scope of consolidation, etc.

Most people are asking how the cost approach translates to the equity approach.

In my opinion, the equity method is converted to the cost method, and it is just a matter of transferring it directly.

20% of the original shareholding, you are calculated according to the equity method, and everything that should have been changed has changed. At that time, when it was obtained, it was treated as goodwill if it was spent more money, and it was not disposed of.

Spend less, and you'll count it as non-operating income.

Now that 40% of the equity has been newly acquired, the 40% equity is also treated as above, and the difference between the book value and the fair value on that day is included in the non-operating income.

As for what you said about "the difference between the book value and the fair value of the original 20% of the original shareholding on the date of the acquisition of the new 40% equity" is a non-existent thing, let's talk about it: the 20% of the original shareholding is calculated according to the equity method, and everything that should have changed has changed. There can't be any difference, unless you don't know the subsequent measurement of the equity method.

1. The equity method is used to account for the investment at the time of acquisition, so the difference is included in the non-operating income (i.e., the profit or loss for the current period);

2. Additional investment to convert the cost method into the equity method; In the cost method, when it is greater than, no treatment is made; Converted to the equity method, the cost method before the adjustment must be treated according to the equity method, because it is regarded as non-operating income, because it is before the plastic, so the retained earnings are adjusted.

3. Borrow: bank deposit loan long-term equity investment - ** company investment income to equity method:

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

Credit: Surplus Reserve - Statutory Surplus Reserve.

Profit distribution - undistributed profit investment income.

Borrow: Other comprehensive income.

Credit: Investment income.

1.Goodwill does not need to be reflected in the entries regardless of whether it is the cost method or the equity method, so when the cost method is converted to the equity method, the goodwill does not need to be adjusted. Why is it the question of adjusting retained earnings, retained earnings refer to surplus reserves and undistributed profits, because at the beginning, if it was not accounted for by the cost method, but by the equity method, then there would be (borrow:

Long-term investment, credit: non-operating income This entry, because the conversion date and the initial entry date are already in different accounting periods. This non-operating income has already been (borrowed:

Non-operating income Credit: Profit for the current year and the profit for the current year will be retained earnings or dividends payable after distribution. (Borrow:.)

Profit for the current year Credit: retained earnings, etc.) dividends payable cannot be adjusted again. I will now retroactively trace this entry for the current year, and the non-operating income of the current year has finally flowed into the retained earnings, so I can only adjust the retained earnings, and furthermore, if you convert the non-operating income now, it will affect the profit of the current year, and the accounting does not allow you to do so.

2.If it is a retroactive distribution of dividends to the investee. For example, last year, A owned 5% of B's shares, which was fair and unmeasurable, and B was accounted for using the cost method. If B intends to pay a dividend of 100 at the end of the year, B will receive a dividend of 100 * 5% = 5, and A will make entries on the account as follows:

Borrow: Dividends receivable 5

Credit: Investment income 5--- entry 1 (dividend treatment under the cost method).

However, if A's shareholding ratio rises this year and the cost method is converted to the equity method, this entry must be retrospective, and B's net profit is 100 at the beginning

Entries under the equity method should be:

Borrow: Dividends receivable 5

Credit: Long-term equity investment 5--- Entry 2 (Dividends under the equity method).

To adjust the result of entry 1 to entry 2, simply add an adjustment entry to.

Borrow: Investment income 5

Credit: Long-term equity investment 5

In the same way, since this investment income is last year, the investment income has also entered this year's profits, and is finally distributed into retained earnings. So the adjustment entry becomes.

Borrow: surplus reserve.

Profit distribution - undistributed profit.

Credit: Long-term equity investment 5

Similarly, if the investee's profits are traced back and no entries are made under the cost method, the equity method should recognize the investment income accordingly.

Borrow: Long-term equity investment.

Credit: Investment income.

If now it's retroactive. Investment income should also be converted into retained earnings.

So your problem is that if you want to adjust the previous profit and loss, and the previous profit and loss has entered the retained earnings, you can't adjust it, you can only adjust the retained earnings, and adjust the current period, you can adjust the profit and loss normally.

It's hard to type.。。。

If you say the opposite, if the original cost is greater than, it is the cost of goodwill that is less than and is included in the non-operating income.

The situation you said is a change in accounting policy, and the reason is very simple, because this is all in the past, if it was the equity method at that time, it should be included in non-operating income, but you have already carried forward the retained earnings, so you can only adjust the retained earnings this year.

Personally, I think about the handling of business combinations, if you are taking the exam, remember that.

It's just a rule, and there's no why.