Accounting for long term equity investments

Sickness! You are a long-term equity investment! Regardless of its net assets or fixed assets, you just need to know that on January 2, 2007, the implementation of the new standard, you obtained 25% of the shares of Company B, which is accounted for by the equity method.

You can use the actual price paid (excluding the appraisal, audit, consulting and other expenses incurred to obtain the long-term equity investment) as the investment cost.

Accounting entries at the time of purchase of shares:

Borrow: Long-term equity investment - Company B 40 million.

Credit: Bank deposits of 40 million.

15000 + 2000) * 10,000 yuan.

Borrow: Long-term equity investment 4250

Credit: Bank deposit 4000

Non-operating income 250

With regard to the accounting of long-term equity investment, when the enterprise does not have control over the investee and the joint control has a significant impact, the cost method is used to account for long-term equity investment, and the cost method of long-term equity investment is valued at the initial investment cost.

When the enterprise has control over the investee and the joint control has a significant impact, the equity method is used to account for it, and if the initial investment cost of the long-term equity investment is less than the fair value share of the investee's identifiable net assets that the investee should enjoy at the time of investment, the difference shall be credited to the "non-operating income" account

Here's all you need to do is this:

Borrow: Long-term equity investment - Company B 40 million.

Credit: Bank deposits of 40 million.

Because the consideration paid for the initial investment (4,000) is higher than the fair value of the realizable net assets of the long-term equity acquired (15,000 25 3,750), and this part of the goodwill is not recognized at the time of the initial investment, the problem with depreciation adjustment is that when there is a profit (when the profit is generated) in the future, which leads to a change in the investee's owner's equity, we need to adjust the profit calculated by the investor and the investee due to the different standards for depreciation in accordance with the equity method

Legal analysis: There are two accounting methods: one is the cost method; The second is the equity method.

1.Scope of application of the cost method: (1) long-term equity investment in which the enterprise can exercise control over the investee; (2) Long-term equity investment in which the enterprise does not have control, joint control or significant influence over the investee.

2.Scope of application of the equity method: (1) joint control; (2) Significant impact.

Legal basis: Article 71 of the Company Law of the People's Republic of China The shareholders of a limited liability company may transfer all or part of their equity to each other.

The transfer of equity by a shareholder to a person other than the shareholder shall be subject to the consent of more than half of the other shareholders. Shareholders shall notify other shareholders in writing to solicit consent for their equity transfer, and if other shareholders do not reply within 30 days from the date of receipt of the written notice, they shall be deemed to have agreed to the transfer. If more than half of the other shareholders do not agree to the transfer, the shareholders who do not agree shall purchase the transferred equity; If you do not purchase it, you will be deemed to have agreed to the transfer.

For the equity transferred with the consent of the shareholders, under the same conditions, other shareholders have the right of first refusal. If two or more shareholders claim to exercise the right of first refusal, they shall negotiate to determine their respective purchase ratios; If the negotiation fails, the right of first refusal shall be exercised in accordance with the proportion of their respective capital contributions at the time of transfer.

Where the articles of association of the company have other provisions on the transfer of equity, such provisions shall prevail.

<> long-term equity investment refers to the acquisition of shares of the investee through investment. Many accountants don't know how to make accounting entries and how to account for long-term equity investment, so let's take a look.

Accounting entries for long-term equity investments.

When disposing of a long-term equity investment, the "bank deposit" account shall be debited according to the amount actually received for the change, the "long-term equity investment impairment provision" account shall be debited according to the impairment provision that has been originally accrued, the "long-term equity investment" account shall be credited according to the book balance of the long-term equity investment, the "dividend receivable" account shall be credited according to the cash dividends or profits that have not yet been received, and the "investment income" account shall be credited or debited according to the difference.

What is Long-Term Equity Investment?

<> long-term equity investment refers to the acquisition of shares of the investee through investment. An enterprise's equity investment in other units is usually regarded as long-term holding, and through equity investment to achieve control over the investee, or exert significant influence on the investee, or to establish a close relationship with the investee in order to diversify the business risk.

How to account for long-term equity investment?

There are two accounting methods for long-term equity investment: one is the cost method; The second is the equity method.

1) The scope of cost-based accounting.

A long-term equity investment in which an enterprise is able to exercise control over the investee. That is, the long-term equity investment of the enterprise in the subsidiary.

The enterprise does not have control, joint control or significant influence over the investee, and does not have a long-term equity investment in an active market and its fair value cannot be reliably measured.

2) The scope of equity method accounting.

A long-term equity investment in which the enterprise has common control over the investee. That is, the long-term equity investment of the enterprise in its joint venture.

A long-term equity investment in which the company has a significant impact on the investee (accounting for 20%-50% of the equity). That is, the long-term equity investment of the enterprise in its associates.

1. When an enterprise implements long-term equity investment:

Borrow: Long-term equity investment.

Credit: Bank deposits.

2. When accounting for the investment income obtained from long-term equity investment by the equity method:

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

Credit: Investment income.

3. When accounting for the investment income obtained from long-term equity investment by the cost method:

Borrow: Dividends receivable.

Credit: Investment income.

If an enterprise implements long-term equity investment externally, and then accounts for investment income by equity method or cost method, it shall be accounted for through the "long-term equity investment" account and the "investment income" account. <> long-term equity investment refers to the acquisition of shares of the investee through investment. Equity investment in other units by an enterprise.

Investment income refers to the income obtained by enterprises or individuals from foreign investment (the losses incurred are negative).

In order to account for the long-term equity investment of the enterprise, the enterprise should set up long-term equity investment, investment income and other accounts. The long-term equity investment account accounts for the long-term equity investments held by the enterprise using the cost method and the equity method, the cost obtained by the borrower to register the long-term equity investment and the share to be shared calculated according to the net profit realized by the invested enterprise when the equity method is used for accounting, the share to be enjoyed by the enterprise according to the proportion of its shareholding when the credit registers the value of the long-term equity investment or when the investee declares the distribution of cash dividends or profits when the equity method is adopted, and the share to be shared according to the net loss incurred by the investee. The debit balance at the end of the period reflects the value of the long-term equity investment held by the enterprise.

Under the cost hole method, the long-term equity investment account is used to calculate the investment of the enterprise for a period of more than one year, excluding one year of various equity investments, including the purchaser's ** and other equity investments. Under the long-term equity investment account, a detailed account of ** investment and other equity investment should also be set up. The long-term equity investment account should also set up a detailed account according to the investee unit for detailed accounting.

Under the equity method, the long-term equity investment account should be set up according to the first investment and other equity investment detailed accounts, in addition to detailed accounting, but also should be set up under the first investment, other equity investment detailed accounts, such as investment costs, profit and loss adjustments, equity investment provisions, equity investment differences, etc., to account for and reflect the increase or decrease of the long-term equity investment book balance caused by the equity method accounting.