This knowledge point is a high-frequency test point for the examination. It involves calculation and analysis of the examinations and comprehensive replacement in previous years, so it is also necessary to master it. A new transaction in 2017 involves the accounting processing of purchasing from the final controller and purchasing from an external third party. There are 7 situations in the transformation of long-term equity investment accounting methods. This article only involves the processing in individual statements. The classification of the 6 methods is as follows:
financial assets → equity method
financial assets → cost method (consolidated statement)
equity method → cost method (consolidated statement)
equity method → financial assets
cost method → equity method (Consolidated financial statements, equity is diluted)
Cost method → Financial assets (Consolidated financial statements)
Financial assets converted into equity method accounting
Reason: The shareholding ratio has increased due to additional investment, which has a joint control or a significant impact.
Accounting processing principles: Original equity Fair value + Fair value of new investment
Debit: Long-term equity investment-investment cost (original fair + new fair)
Credit: Available for sale financial assets , etc. (original book value)
Investment income (the difference between original book and fair)
Investment income (the difference between original book and fair)
The cumulative changes in the fair value of the original financial assets transferred to Current profit and loss
Debit: Other comprehensive income
Credit: Investment income
Comparison of the consideration paid with the book value of the identifiable net assets of the invested unit, the difference is handled: the former > the latter, forming goodwill, and not dealt with; the former <>
financial assets converted to cost method
Reason: It realizes enterprise merger under different control in steps, and the principle is similar to the financial assets transfer equity method.
Accounting processing:
Debit: Long-term equity investment (original fair + new fair)
Loan: available for financial assets, etc.
Investment income
Other comprehensive income accumulated during the holding period of financial assets are transferred to current profit and loss.
Debit: Other comprehensive income
Loan: Investment income
Equity method to cost method
Reason: Investors can implement controls after additional investment.
Accounting processing:
Debit: Long-term equity investment ( original book + new fair )
Credit: Long-term equity investment-investment cost
--- profit and loss adjustment/other comprehensive income/other equity changes
Equity method to convert to financial assets
Reason: Due to partial disposal, the shareholding ratio has decreased, and it does not have joint control and significant impact
Debit: Available for sale financial assets, etc. (the fair value of the original equity investment)
Credit: Long-term equity investment (original equity book value)
0 Credit: Long-term equity investment (original equity book value)
0 Investment income (to conclude the difference between the two)
The other comprehensive income included in the period of equity holding by the original investor (except for those that cannot be converted to profit and loss) is transferred to the current investment income, which is consistent with the above-mentioned conversion principles.
cost method to equity method
disposal subsidiary loses control and becomes a major impact or joint control. First, the initial investment cost of long-term equity investment should be carried forward proportionally.
compares the remaining equity investment with the net asset share of the invested unit enjoyed according to the remaining equity holding ratio. The former > the latter, goodwill, and no recognition; the former <>
The share that should be enjoyed by the invested unit when the original investment was acquired and disposal is adjusted to book value (the principle of continuous calculation);
The share that should be enjoyed in the net profit and loss realized by the invested unit when the original investment was acquired and the beginning of the current period (deducting the declared cash dividend and profit) realized by the invested unit when the original investment was acquired and the day when the investment was disposal is handled, the share that should be enjoyed in the net profit and loss realized by the invested unit when the investment was disposed of is handled, and the share that should be enjoyed in the net profit and loss realized by the invested unit when the investment was disposed of is handled, and the share that should be enjoyed in other comprehensive income should be included in other comprehensive income while adjusting the book value of the long-term equity investment.
cost method to convert to financial assets
Reason: Loss of control due to disposal of subsidiary
Accounting processing:
Debit: Available for sale financial assets, etc. (fair value)
Credit: Long-term equity investment (book value)
Investment income (difference)
