How to understand the accounting treatment of business combinations in China s current accounting st

<> Bizhong1. Consolidated financial statements

Consolidated financial statements are the processes by which one company (the consolidated reporting entity) controls one or more other companies (the consolidated reporting entity) and consolidates their financial statements into a single statement. This type of merger typically requires the application of a purchase method, i.e. taking the net asset value of the acquired company as a transaction** and including it in the balance sheet of the purchaser company.

In the consolidated financial statements, the main accounting issues involved include:

Measurement and treatment of goodwill of enterprises;

asset impairment testing to determine whether a write-down of the carrying amount of purchased assets is required;

Adjustments to the financial statements to ensure consistency between the consolidated reporting entity and the purchasing company's financial statements.

Second, the merger and operation of the dust

Merger management refers to the integration of operation and management by one company by controlling another company. This type of merger usually requires the application of the equity method, i.e., the purchaser company will include the equity of the purchased company in its investment.

In the management of mergers, the main accounting issues involved include:

Identification of related party transactions and determination of whether related party transaction disclosure is required;

Determine the net assets of the purchased company and calculate the book value of the investment;

Determine the net profit of the purchased company and calculate the investment income;

Asset impairment testing is carried out on a regular basis to determine whether a write-down of the carrying amount of purchased assets is required.

In addition, when carrying out a business combination, it is also necessary to make adjustments to the financial statements such as the balance sheet, income statement and cash flow statement of the consolidated reporting entity and the purchaser company in accordance with the provisions of the relevant accounting standards to ensure the accuracy and consistency of the financial statements.

Based on the current relevant accounting standards for enterprises in China, this paper analyzes the types of business combinations and the main accounting issues involved.

The types of business combinations are: 1. Substantive merger: It refers to the enterprise participating in the merger, one party replaces the assets and liabilities of the other party with its assets and liabilities, so as to form a new economic entity.

2. Legal merger: refers to the merger of enterprises, one party replaces the legal status of the other party with its legal status, thus forming a new economic entity. 3. Recombinant merger:

refers to the enterprise participating in the merger, where one party replaces the legal status and assets and liabilities of the other party with its legal status, assets and liabilities; Or a new enterprise can be reorganized from multiple companies. 4. Separate merger: a number of enterprises that originally existed separately are separated to form a new enterprise.

The main accounting issues involved include: 1. How to identify whether there are material asymmetries that actually exist or should exist; 2. How to correctly identify the promised goods; 3. How to correctly identify the relevant benefits brought by the commitment; 4. How to correctly identify the corresponding risks brought by the undertaking; 5. How to correctly identify the corresponding future liquidity risks brought about by the undertake; 6. How to correctly argue and identify the corresponding future liquidity risk brought about by the only payment of the bearing and transportation stoves; 7. How to correctly identify the corresponding future protection risks brought by the underwriting; 8. How to correctly identify the corresponding future risks of non-side-shaped assets brought about by the undertaking; 9. How to correctly check the material unequal transactions that have been carried out; 10. How to check the necessary retention amount in accordance with national laws and regulations.

In the event that the merger does not involve the purchase of equity from minority shareholders outside the group, the merging party shall follow the following principles:

1. The assets and liabilities of the merged party recognized by the merging party in the merger are limited to the assets and liabilities that have been recognized on the books of the merged party, and no new assets and liabilities are generated in the merger. The goodwill that was recognized in the books of the merged party before the business combination should be recognized as assets acquired in the merger.

2. The assets and liabilities of the merged party acquired by the merging party in the merger shall maintain their original book value of the merged party. When determining the recorded value of the assets and liabilities acquired in the merger, if the accounting policies adopted by the merged party before the business combination are inconsistent with those of the merging party, the accounting policies should be unified first based on the principle of materiality.

3. The difference between the recorded value of the net assets obtained by the merging party in the merger and the book value of the consideration paid for the business combination shall not affect the income statement of the current period of the merger, and the relevant difference shall be adjusted to the relevant items of owners' equity. First of all, the capital reserve (capital premium or equity premium) is adjusted, and if the balance of the capital reserve (capital premium or equity premium) is insufficient to offset the retained earnings.

4. For a merger of holdings under the same control, when preparing the consolidated financial statements, the merging party shall treat the reporting entity formed after the merger as having been integrated since the ultimate controller began to exercise control, and the retained earnings realized by the parties involved in the merger before the merger shall be reflected in the retained earnings in the consolidated financial statements. In the consolidated financial statements, the composition of the owner's equity shall be adjusted to the extent of the capital reserve of the merging party (or the capital premium part of the adjusted capital reserve), and the part of the retained earnings realized by the merging party before the merger date shall be transferred from the capital reserve to the retained earnings of the merging party according to the proportion of shareholdings.

5. In a business combination under the same control, if the merged party is the ultimate controlling party and acquired from a third party in the previous year, the merging party shall carry out relevant accounting treatment on the basis of the book value of the assets and liabilities of the merged party (including the goodwill formed by the ultimate controller's acquisition of the merged party) in the financial statements of the ultimate controller when preparing the financial statements. The period of retrospective adjustment of the comparative financial statements of the consolidating party shall not be earlier than the period when the parties were under the control of the ultimate controlling party.

Answer: Sleepy B, E

Option B, business combination under the same control does not recognize new goodwill; Option E, in a business combination that is not under the same control, the original goodwill of the merged party is not recognized, but the newly formed goodwill needs to be recognized.