What are the criteria for using the cost method or equity method for long term equity investment? Pl

(1) If the investee does not receive cash dividends (or distributed profits, the same below) after the investment is obtained, or if the cash dividends are distributed but are included in the investment profit or loss, the initial investment cost accounted for by the equity method shall be the same as the initial investment cost when the investment is acquired; (2) If the initial investment cost has been offset by cash dividends during the cost method accounting, the initial investment cost when converted to the equity method is the investment cost after the write-off; (3) The carrying amount of an investment measured by the Standards for the Recognition and Measurement of Financial Instruments is defined in Standard No. 2 as "long-term equity investments not regulated by this Standard", such as investments that are accounted for as "financial assets", and when such investments are converted to equity method accounting, the book value is generally fair value; (4) The above regulations only recognize the initial investment cost of the investment when the equity method is converted, and the corresponding accounting treatment should be carried out according to other provisions when the equity method accounting begins. (2) The investment accounting before the conversion to the equity method shall be retrospectively adjusted based on the equity method. 1.

The accrued share of the net profit or loss realized by the investee during the period from the beginning of the cost method to the adoption of the equity method should be supplemented. If the investment enterprise pays back cash dividends during this period, it should be deducted from the share and the "profit and loss adjustment" of the investment. 2.During this period, if the fair value of identifiable net assets (hereinafter referred to as net assets) changes due to reasons other than net profit or loss, the investment enterprise shall also recognize its accrued share according to the original shareholding ratio.

3.The difference of equity investment shall be treated in accordance with the relevant provisions of Standard No. 2, i.e., the difference of equity investment shall be the difference of borrowing (i.e., the initial investment cost is greater than the share of the investee's net assets enjoyed at the time of investment), and shall not be treated as an accounting entity; The difference of equity investment is the loan difference (meaning that the initial investment cost is less than the share of the investee's net assets enjoyed at the time of investment), and the difference shall be included in the profit or loss for the current period and the investment cost shall be adjusted. 4.

The above-mentioned equity investment difference calculated based on the original shareholding ratio shall be considered together with the equity investment difference calculated in the additional investment business, and the equity investment difference related to the overall investment shall be determined on this basis.

Cost method accounting: the proportion of investment <20% or the proportion of investment" 50% Equity method accounting: 20% = "proportion of investment = <50% Control must be cost method.

It is the equity method that is jointly controlled and has a significant impact. Non-controlled, jointly controlled, and significant influence, if the fair value can be reliably measured, the content of financial asset accounting may be transactional financial assets, and may be available for ** financial assets. If the fair value cannot be reliably measured, it belongs to the cost method of accounting. Oh.

It is divided into four categories: 1. To achieve control (subsidiary), the cost method is adopted; 2. Joint control (joint venture), using the equity method; 3. Significant impact (joint ventures, general shares of more than 20%, less than 50%), using the equity method; 4. If there is no significant impact and the fair value cannot be reliably measured, the cost method shall be adopted.

The equity that cannot be controlled, jointly controlled, and has a significant impact is accounted for by the equity method, and the proportion is generally 20% = "Investment Proportion = <50% The rest is accounted for by the cost method.

The differences between the cost method and the equity method are as follows:

1. The nature of the work is different.

The cost method is mainly some transactional work. The personnel department is responsible for the decision-making of hospitality leaders.

The equity law includes strategic work and transactional work, and the organization that approves the role, the leading accounting institution or the accounting personnel shall carry out accounting and implement accounting supervision in accordance with the law.

2. Different responsibilities.

The cost method is responsible for the unified management of the property and materials of the unit, conducts a property inventory once a year, and improves the system of safekeeping, receiving, maintaining, compensating, scrapping, reporting losses and personnel transfer and handover, so as to ensure that the accounts are consistent.

The equity method is responsible for organizing the preparation of the fund-raising plan and use plan of the unit, and organizing the implementation. The fund-raising plan and the use plan should be combined with the unit's business and business decision-making, as well as production, operation, sales, labor, technical measures and other plans, on an annual, quarterly and monthly basis, and according to the economic accounting responsibility system of the enterprise, the plan indicators will be decomposed and implemented, and the implementation will be supervised. According to the requirements of production and operation development and saving funds, organize relevant personnel, reasonably approve the quota of funds, strengthen the management of the use of funds, and improve the effect of the use of funds.

According to the requirements of the combination of management and the centralized and hierarchical management of funds, formulate the implementation measures for fund management and accounting, and organize relevant departments to implement them.

3. The assessment content is different.

The cost method mainly assesses whether they can conscientiously implement the constitution, laws and decrees of the country, whether they have the moral character that staff should have, whether they have the professional skills to do their own work, as well as the necessary cultural knowledge and practical work ability.

The equity method mainly assesses attendance, academic performance and work attitude, and the quantity, quality and efficiency of completed tasks.

4. Different treatment methods.

The cost method should be calculated on an annual basis and prepaid monthly or quarterly. At the end of each month, the enterprise should transfer the month-end balance of the cost, expense and tax account to the debit of the "Profit of the Year" account, and the balance of the income account to the credit of the "Profit of the Year" account.

Then calculate the difference between the current borrower amount of the "Profit for the Year" account. The credit balance is the total profit realized by the enterprise, that is, the pre-tax accounting profit, and the debit balance is the total loss incurred by the enterprise.

The equity method believes that the primary purpose of income tax accounting should be to recognize and measure the impact of the difference between accounting and tax laws on the future inflow or outflow of economic interests of the enterprise, and put the assets and liabilities of the enterprise affected by income tax accounting in the first place.

The income statement debt method starts from the perspective of income and expenses, and believes that the direct recognition of income and expenses related to transactions or events should be considered first, and the income of enterprises should be measured from the direct ratio of income and expenses.

Encyclopedia - Cost Method.

Encyclopedia - Equity Method.

The scope of application is different: the cost method focuses on the initial investment cost, and the changes of other donor recipients are generally not adjusted. The equity method focuses on the ownership rights and interests of the donor enterprise, and as long as the ownership rights and interests of the donor enterprise change, the investment enterprise will also be adjusted accordingly.

When the investment unit adopts the cost method, the carrying amount of the long-term equity investment is not affected by the profit or loss and other equity changes of the investment unit. Investment income can only be recognized when cash dividends are distributed by the investee, and the book value of the long-term equity investment is adjusted accordingly.

<> Under the equity method, the carrying amount of a long-term equity investment is affected by changes in the owner's equity of the investee. Because the book value of a long-term equity investment needs to be adjusted according to the owner's equity of the investee. As soon as the owner's equity changes, the carrying amount of the investor's long-term equity investment will be adjusted accordingly.

Therefore, when the investee is profitable, net operating income = operating income - operating expenses - depreciation of productive fixed assets - production tax + net rental income, net rental income from other assets and net rent of self-occupied houses, etc. Net property income excludes premium gains on the transfer of ownership of assets.

The formula for calculating the equity method: the growth rate of real per capita disposable income = (per capita disposable income in the reporting period per capita disposable income in the base period) consumption ** index -100%. The initial cost of a long-term equity investment is determined by the social connotation.

The equity method is the embodiment of value, while the equity method is often not equal to value. Therefore, when the investee is profitable, the retained income of owners' equity increases, and the long-term equity investment of the investee should be increased to recognize the investment income. When a loss is incurred, the carrying amount of the long-term equity investment should be written down.

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The cost method of long-term equity investment is to confirm the book value of the inheritance capital, so as to keep it unchanged, while the equity method is to start the valuation of the initial investment cost, and then adjust the book value according to the equity share, the scope of application of the two is different, the former focuses on the investment cost, and the latter focuses on the owner's interests.

1. Cost method: After the investment, the book value is recognized according to the actual cost, and the book value of the long-term equity investment remains unchanged except for additional investment and reduced investment.

2. Equity method: The investment is initially valued at the initial investment cost, and the book value of the investment is adjusted later according to the change in the owner's equity share of the investee enjoyed by the investment enterprise.

There is a big difference in the scope of application between the cost method and the equity method, the two will have different effects in different places, and their calculation methods have a very unique place, the content is different, the situation is different, the cost method and the equity method need to be determined according to the status of the individual's long-term equity investment.

Difference 1: Scope of application.

First, the cost method is the two ends, and the equity method is the middle.

Equity method: The applicable situation is to account for the long-term equity investment in joint ventures and associates, usually accounting for 20% to 50% of the shares.

Cost method: It is applicable to enterprises or subsidiaries that can exercise control (i.e., more than 50% of the shares).

The second is for the "four no" enterprises, the "four no" enterprises, that is, they do not have control, joint control, significant influence, and fair value cannot be reliably measured. This situation is generally to buy a small number of shares of non-listed companies, accounting for less than 20%, these shares are non-tradable, there is no ** in the open market, and the fair value cannot be reliably measured.

If fair value can be reliably measured, it should be treated in accordance with the criteria for trading financial assets or available financial assets.

Difference 2: Treatment of investment income.

The cost method can be simply understood as a cash basis, regardless of whether it is a profit or a loss, and the investment income is recognized only when the invested enterprise declares dividends. The carrying amount of long-term equity investments under the cost method is generally not adjusted unless the investment is increased or decreased.

The equity method can be understood as the accrual basis, as long as the invested enterprise has a profit at the end of the year, regardless of whether it is divided or not, the investment income will be recognized in proportion to the share I enjoy, and the book value of the long-term equity investment will be adjusted. Of course, if there is an internal transaction with an associate or joint venture, it will also be offset.