Does a business combination under the same control create goodwill

No, it won't. A business combination under the same control does not create goodwill. However, the accounting principles are different from those before the merger.

The accounting principles for business combinations under the same control are as follows: the cost of a business combination under the same control shall be determined according to the share of the carrying amount of the owner's equity of the investee; In the case of a business combination under the same control, the original book value of all assets and liabilities of the investee remains unchanged; The business combination under the same control does not generate new assets and liabilities or goodwill, but the original book goodwill of the investee remains unchanged.

Extended information: 1. Principles for dealing with business combinations under the same control: For business combinations under the same control, it can be regarded as the reintegration of the interests of two or more enterprises involved in the merger.

The reason is that, from the perspective of the ultimate controller, such a business combination will not result in the inflow and outflow of economic interests that constitute the entire enterprise group, as well as the economic resources actually controlled by the ultimate controller before and after the merger. Nothing has changed. The transaction cannot be treated as a sale or purchase.

2. For a business combination under the same control, if it does not involve the purchase of equity from minority shareholders, the merging party shall follow the following principles: the assets and liabilities of the merged party recognized and acquired by the merging party in the merger shall be limited to the book assets and liabilities of the merged party that were previously recognized, and no new assets and liabilities shall be created. For a business combination under the same control, from the perspective of the ultimate controller, there is no change in the amount of net assets that can be controlled before and after the business combination.

Therefore, even if there is a difference between the recorded value of the net assets acquired and the carrying amount of the merger consideration paid during the merger process, under normal circumstances, the business combination under the same control does not give rise to a new goodwill factor, that is, no new assets are recognized, but the goodwill that was originally recognized in the books of the merged party before the business combination is recognized as assets acquired in the merger. The original book value of all assets and liabilities of the merged party acquired by the merging party in the merger remains unchanged. If the accounting policies adopted by the merged party before the business combination are inconsistent with those of the merging party, the accounting policies shall be unified in accordance with the principle of materiality, that is, the merging party shall adjust the book value and liabilities of the assets of the merged party, and the adjusted book value shall be used as the recorded value of the relevant assets and liabilities.

One of the basic reasons for the above adjustment is that the merging parties involved in the merger and the merged party are considered as a whole. For a complete accounting entity, a relatively uniform accounting policy should be adopted for the relevant transactions and events, and on this basis, the financial position and operating results should be reflected.

1.According to the relevant provisions of the Accounting Standards for Business Enterprises System (2006), the merger of the same control does not generate goodwill.

2.In the case of a merger of enterprise holdings under the same control, the investor shall, on the date of the merger, take the share of the book value of the investee's owner's equity as the initial investment cost of the long-term equity investment. It can be seen that there is no difference between the initial cost of the investor's long-term equity investment in the investee and the investee's share of ownership equity attributable to the investor.

3.Subsequently, although the investor's long-term equity investment is accounted for by the cost method, it should be adjusted according to the equity method when preparing the consolidated financial statements. After the adjustment, the carrying cost of the investor's long-term equity investment in the investee (excluding the provision for the decline in the value of the long-term equity investment) is still the same as the investee's share of owner's equity attributable to the investor, and there is no difference.

A business combination under the same control does not create goodwill. The accounting principles for business combinations under the same control are as follows:

1. The cost of business combination under the same control shall be determined according to the share of the book value of the owner's equity of the invested enterprise;

2. In the case of a merger of enterprises under the same control, the assets and liabilities of the investee shall remain unchanged at the original book value;

3. The merger of enterprises under the same control does not generate new assets and liabilities, nor does it generate goodwill, but the goodwill of the original book of the investee remains unchanged.

Goodwill usually refers to the value that an enterprise can obtain under the same conditions that is higher than the normal rate of return on investment. This is due to the advantages of the geographical location of the enterprise, or due to various reasons such as high operating efficiency, long history, and high quality of personnel, compared with peer enterprises, it can obtain excess profits. Goodwill refers to the potential economic value that can generate excess profits for the business operations in the future period, or the capitalized value of an enterprise's expected profitability that exceeds the normal profitability of identifiable assets (such as the average social return on investment).

Goodwill is an integral part of the overall value of a business. In a business combination, it is the difference between the cost of the investment of the purchased enterprise and the fair value of the net assets of the merged enterprise.

Formula for calculating goodwill in a business combination not under common control:

Net personal asset value = operating income - operating expenses - depreciation of productive fixed assets - production tax + net income from renting out houses, net income from renting out other assets and net rent of self-owned housing conversion chain, etc. Net property income does not include premium income from the transfer of ownership of assets.

Real growth rate of per capita disposable income = (per capita disposable income in the reporting period per capita disposable income in the base period) Household consumption** index -100%.

1. The indirect measurement using the difference method is consistent with the provisions of the International Accounting Standards.

2. Tax treatment of goodwill: In view of the equity method accounting for long-term equity investment, according to the provisions of the Ministry of Finance and the State Administration of Taxation on the issuance of the "Answers to Questions Concerning the Implementation and Related Accounting Standards (III)", the tax law does not recognize positive goodwill, nor does it recognize negative goodwill.

3. Impairment treatment of goodwill: According to the provisions of Accounting Standards for Business Enterprises No. 8 - Asset Impairment, the impairment test and recognition of goodwill should be carried out in combination with the asset group or asset group combination related to it.

4. In accordance with the relevant provisions of the tax law, the items allowed to be deducted before the enterprise income tax must follow the principle of deduction based on the facts, and any form of reserves drawn by the enterprise according to the provisions of the financial accounting system shall not be deducted before the enterprise income tax. Therefore, the tax law does not recognize the provision for goodwill impairment. Si wide sails.

Summary. Goodwill is only recognized in the consolidated statements. Individual reports are not confirmed. Because goodwill is related to the whole.

If the shareholding merger is not under the same control, goodwill will not be recognized if it is a separate statement. In the case of consolidated statements, goodwill is recognized.

Why does the merger of enterprises not under the same control not recognize goodwill, but the preparation of consolidated financial statements is to recognize?

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Goodwill is only recognized in the consolidated statements. Individual reports are not confirmed. Because goodwill is related to the whole. If the shareholding merger is not under the same control, goodwill will not be recognized if it is a separate statement. In the case of consolidated statements, goodwill is recognized.

Business combinations that are not under common control.

Formula for calculating goodwill:

Personal net worth.

Operating income - operating expenses.

Depreciation of productive fixed assets - production tax + net income from rental housing, net income from leasing other assets and net rent converted from self-owned residential fiber accompaniment house, etc. Net property income does not include premium income from the transfer of ownership of assets.

Disposable income per capita.

Real growth rate = (per capita disposable income in the reporting period per capita disposable income in the base period) Household consumption ** index.