What is the initial investment cost for a non business combination to pay cash to obtain a long term

There are three forms of long-term equity investment obtained by non-business combination, namely, long-term equity investment with significant influence and joint control and significant influence and long-term equity investment without common control and significant impact, and the fair value cannot be measured.

Due to the different results of its investment, the accounting and treatment are also different, which leads to the recognition of its initial investment cost is also different.

The above three types can also be divided into two categories, namely joint control and significant influence, which are not controlled but can have a great degree of influence on the investee's business decisions. This type of accounting treatment is based on the "equity method". The other type of investment, which is essentially a small investment, will not play a decisive role in the investee's business decision-making, and this kind of investment accounting treatment is accounted for by the "cost method".

Due to the different investment effects formed, there are different accounting methods. Therefore, there will be a difference in the amount of recognition of the initial investment cost.

Under the equity method, if the investment amount paid in cash is greater than its share of the fair value of the investee's net assets, then the part of the investment is essentially the "goodwill" of the investee, which should be included in the carrying amount of the medium- and long-term equity investment, without adjustment, that is, the cash amount of the ward; If the amount of investment paid in cash is less than the share of the fair value of the investee's net assets, it is equivalent to the investee making a certain concession, and the investor will obtain a certain amount of profit from the investment, and the initial investment of the long-term equity investment is no longer the cash amount paid, but the long-term equity investment should be adjusted (increased) by that part of the profits. The cost of investment here is the cash paid plus the proceeds.

Under the cost method, the initial investment cost is the cash amount paid.

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For a long-term equity investment formed by a merger of enterprises not under the same control, the difference between the initial investment cost and the fair value share of the investee's identifiable net assets at the time of investment shall be included in the "non-operating income". Review the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree and the measurement of the cost of consolidation; If, after review, the cost of the merger is still less than the fair value share of the identifiable net assets of the acquiree obtained in the merger, the difference shall be included in the profit or loss for the current period.

Investment:

Investment refers to the process by which a state, an enterprise or an individual signs an agreement with the other party for a specific purpose to promote social development, achieve mutual benefit and transfer funds. It is also an economic behavior in which a specific economic entity invests a sufficient amount of funds or monetary equivalents in kind into a certain field in a certain period of time in order to obtain income or capital appreciation in the foreseeable period in the future. It can be divided into physical investment, capital investment and ** investment.

No processing is required on individual reports.

On the consolidated statements, adjustments need to be made to include non-operating income.

The initial investment cost of a long-term equity investment in a business combination under the same control is measured in the form of cash payments, transfer of non-cash assets or assumption of liabilities.

1) Equity investment obtained by a business combination under the same control, where the merging party pays cash, transfers non-cash assets or assumes debts as the consideration for the merger.

The initial investment cost of the long-term equity investment shall be based on the share of the book value of the owner's equity of the merged party on the date of the merger. The difference between the initial investment cost of a long-term equity investment and the cash paid, the non-cash assets transferred, and the carrying amount of the debt assumed.

The capital reserve should be adjusted; If the capital reserve is insufficient to offset the offset, the retained earnings shall be adjusted. There are obvious differences between the old and new standards: the original standard uses the carrying amount of the invested assets as the investment cost; The new standard is based on the acquisition of a share of the carrying value of the investee's owner's equity as the initial investment cost.

2) For equity investment obtained by a business combination not under the same control, the initial investment cost is the fair value of the assets, liabilities incurred or assumed by the investor and the equity ** issued by the investor to obtain control over the purchaser on the acquisition date, that is, the fair value of the assets paid is taken as the initial investment cost.

1. Calculate with the initial investment cost

Borrow: Long-term equity investment - cost.

Credit: Bank deposits.

2. If the initial investment cost is less than the fair value share of the investee's identifiable net assets at the time of investment, the following entries shall be made:

Borrow: Long-term equity investment - ** company (cost).

Credit: Non-operating income.

3. If the company is a long-term equity investment formed by a non-enterprise merger (i.e., a long-term equity investment formed by a non-controlling merger), it does not need to be under the same control or not under the same control, and only needs to use the fair value of the actual consideration paid as the initial investment cost of the long-term equity investment.

For a long-term equity investment obtained by a business combination under the same control, the initial investment cost is defined as (d share of the investee's net assets).

The initial investment cost refers to the total price actually paid at the time of obtaining the investment, including taxes, handling fees and other related expenses. However, cash dividends that have been declared but not yet received in the price actually paid, or interest on bonds that have reached the interest payment period but have not yet been received, should be accounted for separately as receivables.

In October 2005, the self-study exam "Business Accounting" real questions and multiple-choice questions No. 1.

a.Purchase price.

b.Taxes. c.Premium.

d.Appraisal fee for invested assets.

e.Audit fees for invested assets.

See the answer explainedCorrect Answer:abcProofreading Answers:1.Not all prices paid for an investment are considered as investment costs;

2.The initial investment cost refers to the full price paid when acquiring the long-term equity investment, as well as the taxes, handling fees and other related expenses paid. However, it does not include the appraisal, audit, consulting and other expenses of the invested assets incurred for investment;

3.Dividends are also excluded.

Textbook pages: 201 pages.

Answer] The cash dividends that have been declared but not yet received in the price actually paid :d should be treated as dividends receivable and should not be included in the initial investment cost of long-term stock rights investment.