The concept of long term equity investment cost method and the main features of its accounting are a

1. Long-term equity investment in which the investment enterprise can exercise control over the investee.

That is, a long-term equity investment in a subsidiary. Note: The cost method is used for the individual statements of the investor's investment in the subsidiary, and the equity method (overall view) is used for the consolidated statements.

2. The investment enterprise does not have common control or significant influence on the investee, and has no fair value in the active market.

Long-term equity investments that cannot be reliably measured.

Accounting treatment of the cost method: There is no cost of long-term equity investment under the cost method.

1. Under the cost method, long-term equity investment should be measured at the initial investment cost (50% and 20% respectively). The carrying amount of the long-term equity investment shall be adjusted for additional or withdrawn investments.

2. The cash dividends or profits declared by the investee shall be recognized as the current investment income according to the part enjoyed.

Borrow: Dividends Receivable Loan: Investment Income.

3. After confirming the cash dividends or profits to be shared, the investment enterprise should consider whether the long-term equity investment is impaired.

(1) The scope of long-term equity investment accounted for by the cost method

A long-term equity investment in which the enterprise is able to exercise control over the investee. That is, the long-term equity investment of the enterprise in the subsidiary. (50% or more).

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. (20% or less).

2) The range of long-term equity investments accounted for by the equity method (20% to 50%)

When the enterprise has joint control or significant influence on the investee, the long-term equity investment shall be accounted for by the equity method.

Adjustments to the initial investment cost.

If the initial investment cost of a long-term equity investment is greater than the fair value share of the investee's identifiable net assets at the time of investment, the initial investment cost of the long-term equity investment shall not be adjusted; If the initial investment cost of a long-term equity investment is less than the fair value share of the investee's identifiable net assets at the time of investment, the difference shall be included in the current profit or loss, and the cost of the long-term equity investment shall be adjusted at the same time.

The above content refers to: Encyclopedia - Long-term Equity Investment Equity Method.

The difference between the cost method and the equity method of long-term equity investment mainly lies in the following two points.

1. The book value of the two is different: the cost method, the book value is recognized at the actual cost after investment, and the book value of long-term equity investment remains unchanged except for additional lease investment and reduced investment. Under the equity method, the investment is initially valued at the initial investment cost, and then adjusted according to the change in the owner's equity share of the investee enjoyed by the investment enterprise.

Second, the accounting treatment of the two is different. There are differences between the two in terms of investment recognition, asset share recognition at the end of the period, accounting treatment and account setup when processing investments.

The cost method of long-term equity investment accounting refers to the method of valuing investment at cost, under the cost method, the long-term equity investment chain car is valued at the initial investment cost, and its book value is generally not adjusted. The cost of long-term equity investments should be adjusted only upon receipt of liquidation dividends and additional or recouped investments.

Under the cost approach, long-term equity investments should be measured at the cost of the initial investment. The cost of the long-term equity investment should be adjusted for the additional or recouped investment. The cash dividends or profits declared by the investee shall be recognized as investment income for the current period, regardless of whether the distribution of profits is a distribution of the net profits realized by the investee before or after the investment is obtained.

For the above four types of equity investment, when an enterprise adopts long-term equity investment accounting, it should adopt the cost method of accounting, otherwise it should adopt the equity method of accounting.

The cost method is that when the enterprise purchases the ** as a long-term investment, it should be recorded as the cost of the long-term investment according to the actual price paid. During the holding period, the amount of investment reflected at cost in the "Long-Term Equity Investment" account remains unchanged.

**The dividends obtained from the investment are regarded as investment income and do not affect the book value of the investment account, and the realized profit of the invested enterprise leads to an increase in the net asset value at the end of the period, or the loss leads to a decrease in the net asset value, and does not affect the amount of costs reflected in the "long-term equity investment" account of the investment enterprise.

With regard to the long-term equity investment cost method accounting, the following statements are correct ().

a.At the time of cash purchase, the full price paid is recorded as the cost of the investment, except for the declared cash dividends that have not yet been received.

b.Cash dividends received should be recognized as investment income.

c.The net profit of the invested enterprise should be adjusted to the book value of the equity investment during the growth period.

d.The scope of application is less than 5% of the voting rights held by the investee.

Correct answer: At the time of cash purchase, the full price paid is recorded as the cost of investment, except for the cash dividends that have been declared and not yet received; Cash dividends received should be recognized as investment gains.