The relationship between investment income and fair value change gain or loss .

Fair value change gain or loss refers to the difference between the carrying amount of an asset and its fair value at the end of the period when the fair value measurement model is subsequently adopted after acquisition. It is a new item under the new accounting standards, and its impact on the net profit and income tax payable of listed companies needs to be determined separately according to the holding period and the disposal period.

According to the relevant provisions of the new accounting standards, the closing book value of a trading financial asset is the difference between its fair value at that point in time and the previous book value, that is, the amount of fair value change needs to be included in the current profit or loss. At present, the Ministry of Finance and the State Administration of Taxation clearly stipulate in the notice that the "fair value change profit or loss" during the holding period will not be considered when calculating taxes, and only at the time of actual disposal, the difference between the price obtained after deducting its historical cost will be included in the taxable income during the disposal period, which shows that the tax basis of trading financial assets is still its historical cost.

Therefore, when the fair value changes during the period when the listed company holds trading financial assets, there is a "temporary difference" between the carrying amount and the tax base, and the difference will only be reversed after the actual disposal.

Investment income is the return on an enterprise's foreign investment in a certain accounting period. Investment income includes dividends received from foreign investments and interest received on bonds, as well as the difference between the proceeds from the transfer of claims and the book value of the receivables recovered at or before maturity of the investment. Investment activities may also suffer losses, such as the difference between the maturity and transfer proceeds of an investment and the carrying amount of the proceeds before maturity.

Investment income minus investment losses is net investment income. With the increasing power of management and use of funds held by enterprises, and the gradual improvement of the capital market, the profits or losses obtained from investment activities are not obtained by enterprises through their own production or labor activities. However, it is an important part of the total profits of enterprises, and its proportion is developing more and more.

On the surface, although the purpose of enterprise investment is different, in essence, the enterprise considers how much profit a certain investment can bring to the enterprise, and whether the investment income exceeds the cost of capital, otherwise, the investment is meaningless and worthless.

Risk and return are a pair of interrelated concepts, generally speaking, the greater the risk, the greater the return, there is no such thing as an investment object with a large return and little risk. A successful investor needs to balance risk and return with a view to achieving a high level of return with a certain level of risk, or maintaining a low level of risk with a certain level of return.

The fair value change of trading financial assets during the holding period is included in the fair value change profit or loss, which can only be said to be included in a temporary account, and cannot be regarded as the real realized profit or loss of the asset.

Fair value change gain or loss is the accounting of market changes in financial assets when there is no **.

Investment income is the income obtained at the time of **.

Investment income refers to the income obtained by the enterprise from foreign investment (the loss incurred is negative), such as the dividend income obtained by the enterprise from foreign investment, the interest income of bonds, and the profit shared by joint operation with other units.

Fair value change gains or losses refer to the gains or losses that should be included in the current profit or loss arising from changes in the fair value of various assets, such as investment real estate, debt restructuring, non-monetary exchange, and transactional gold and property financing.

The main difference between the two is that the return on investment is generally the income that has already been realized. The fair value change is only a price fluctuation reflected in the book, and there may not be actual realization.

Generally speaking, with the exception of long-term equity investments accounted for by the equity method, investment income is a realized profit or loss. The fair value change gain or loss is only a book gain or loss, not an actual profit or loss.

For example, 100 yuan to buy a **, the market price at the end of the year is 120, and the fair value change profit or loss of 20 yuan is recognized, but the market price of ** in the second year drops to 90, so the 20 that rose in the first year is actually gone.

And if it is sold at 120 at the end of the first year, then the 200,000 yuan will become the actual income, and the market price ** in the second year will not be affected.

Gains or losses on changes in fair value are recognized in investment income.

Why do gains and losses on fair value changes end up in investment income?

The fair value change profit or loss should be transferred to investment income mainly to reflect the profit or loss generated by the enterprise more clearly.

At the time of disposal, the fair value change profit and loss will be transferred to other business costs, and the profit and loss account will have no impact on the profit or loss.

The purpose of the guidelines is twofold:

First, in order to better account for the income generated by investment real estate, from the perspective of the entire business process, that is, from the perspective of the entire process of acquisition, subsequent measurement and disposal of investment real estate, only the transfer of fair value change profit and loss to other business costs can truly reflect the profit and loss of the business;

Second, because the fair value change profit or loss is a transitional account, the fair value change that occurs in ordinary times is uncertain, and there is a possibility of increase or decrease at any time. It is too unstable, such as the direct recognition of income with state fruits, which is easy to cause the untruthfulness of the statement.

However, after the disposal of the asset, the income generated by the asset has been determined, so it will be in the transitional account at this time"Fair value change gain or loss"The amount accounted for in the lead is transferred out and transferred to other business costs, and the amount at this time is the real realized profit and loss.

Fair value change gain or loss"Subjects and"Other business costs"The accounts are all profit and loss accounts, and the closing balance should be transferred to"Profit for the year"account, so this carry-forward entry does not affect the profit or loss for the current period.

The transfer of capital reserve to other business costs is mainly to reflect the real income, so the capital reserve that was originally directly included in the owner's equity is carried forward to other business costs for recognition.

Put in fair value change gain or loss. The item "Fair Value Change Profit or Loss" reflects the net income or net loss of the change in the fair value of Gongchang that the enterprise is currently recognizing, and if it is a net loss, it is filled in with a "-" sign. In general, the gain on the change in fair value of the public tolerance includes the following:

1. Gains or losses on changes in fair value of trading financial assets (such as **, bonds, **, **, etc.).

2. Gains and losses on changes in fair value of investment real estate.

3. Gains or losses on changes in the fair value of derivative financial assets.

4. Gains and losses on changes in the fair value of financial liabilities.

Gains or losses on changes in fair value are not converted into investment income.

Accounting for Transactional Financial Assets:

Initial acquisition. Borrow: Trading Financial Assets – Costs (Fair Value), Dividends Receivable (Cash Dividends Declared but Not Paid), Interest Receivable (Interest on Bonds Paid but Not Received), Investment Income (Transaction Costs), Taxes Payable – VAT Payable (Input Tax) (Deductible VAT on Transaction Costs), Credit:

When the fair value of other monetary funds (the total price paid) is greater than the book value in subsequent measurements

Debit: Trading Financial Assets - Changes in Fair Value, Credit: Gains or Losses on Changes in Fair Value, When the Fair Value is Less Than the Book Value:

Borrow: Gains or losses on changes in fair value, Credit: Trading financial assets - Changes in fair value, when cash dividends or interest accrued at maturity are declared, Borrow: dividends receivable or interest receivable), Credit: investment income, when cash dividends or interest are received:

Borrow: other monetary funds, etc., Credit: Dividends receivable (or interest receivable), ** of trading financial assets, Borrow:

Other monetary funds, etc. (net selling price actually received), credit: trading financial assets - costs, trading financial assets - fair value tease (or debit), investment income (difference and squeeze, loss debited, gain credited), tax payable - VAT payable on transfer of financial products.

1. Different ways of earning:

Investment income refers to the income obtained by enterprises or individuals from foreign investment (the losses incurred are negative), such as dividend income, bond interest income and profits from joint ventures with other units. Fair value change income is the income formed by the change in the fair value of assets or liabilities, which belongs to internal income.

2. The nature of the income is different

Fair value change gains and losses are aimed at those assets measured at fair value, mainly including trading financial assets (such as **, bonds, **, **, etc.), investment real estate, derivative financial assets, financial liabilities four categories. Investment income is when the investment asset**, the real profit or loss will be reflected in the investment income.

3. Different accounting treatments:

Under the new accounting standards, when an enterprise makes provision for "bad debts, inventory depreciation and held-to-maturity investment", the provision for bad debts and inventory depreciation are debited as "asset impairment loss" and credited as "bad debt provision and inventory depreciation provision".

It can be understood as an "administrative expense" (but not an administrative expense), and the balance of the "Asset Impairment Loss" account is transferred to the "Profit for the Year" account at the end of the month.

Investment income accountingThe investment income or investment overallocation loss recognized by the enterprise according to the long-term equity investment standards shall be accounted for in accordance with the detailed deficit index of the investment project, and the balance of this account shall be transferred to the "current year's profit" account at the end of the period, and there should be no balance after the carry-over of this account.

Encyclopedia - Investment income

Encyclopedia - Fair Value Change Income