On the cost of long-term equity investments accounted for under the law of My Opinion

[Abstract] This paper for using the cost method of accounting for long-term equity Investments when the investee company declared cash dividends, in particular, Investment in business Investment are invested enterprises before the net profit, Investment companies how to do simple accounting proposed approach.

[Paper Keywords] long-term equity Investment, cost, cash dividends
<"Enterprise Accounting Standards No. 2 - long-term equity Investments>> Application Guide provides long-term equity Investments for the following types of equity Investment: first, held by an enterprise that is able to exercise control over Investment in equity Investment, and the second, the enterprise can be held together with the other joint venture partners on joint control over the investee's equity investment, the third, held by an enterprise can exercise significant influence over the investee's equity investment, the fourth, the invested enterprise does not have control, joint control or significant influence, and are not quoted in an active market, fair value can not be reliably measured equity investment. For the above 4 types of equity investment, corporate accounting in the use of long-term equity investments accounting, meets the first and fourth are two types of equity investment, enterprises should adopt the cost method, and vice versa for using the equity method.

The so-called cost, is the long-term equity investments should be in accordance with the initial investment cost of one account, not with changes in investee equity investment enterprises to adjust the long-term equity investments. For long-term equity investments under cost method, the authors note the following two aspects .

First, the investment companies to accept all of the cash dividends are generated by the invested enterprise investment in the future the accumulated net profit. Distributions declared by the investee's cash dividend. Investment enterprise should be recognized as current investment income
Example I: A company in January 1, 2006 the share price of 30 million people 10% of the shares of Company B, while 2 million to pay related taxes, funds are paid by bank deposits. B companies achieve an annual net profit and the second beginning of last year's cash dividend announcement issued in Table l.


A company's accounting year as follows (unit: million):
1.2006 on Jan. 1. A business man stock options:
By: Long-term equity investment of 32
Credit: bank deposits 32
22,007 in February. B when the company declared dividends:
By: Dividends receivable 15
Credit: Investment income 15
3.2008 in February, when B Company declared dividends:
By: Dividends receivable 3.2
Credit: Investment income 3.2
4.2009 in February, when B Company declared dividends:
By: Dividends receivable 3
Credit: Investment income 3
Second, the investment companies to accept all of the cash dividends are not part of its investment in the future be invested enterprises have accumulated net profit. That there is cash dividends received by investors before net realized investment unit. It should be offset against the cost of long-term equity investments.

Under the cost method, investment cost of corporate long-term equity investment write-down and reversal of the calculation, is a very difficult problem. In fact, a careful analysis of the cost of long-term equity investment write-down of the reasons. On the cost method Long-term equity investment plays a key role . If the investment business investment after the cumulative cash dividends (referred to as total cash dividends received) exceeds the investment companies from the beginning to the end of last year to invest the investee's net profit accumulated percentage of the number of shares (referred to as the aggregate cash receivable dividends) of the difference. that the cumulative cash dividends received is greater than the cumulative cash dividends receivable, is to be invested enterprises pay the actual cash dividends from the investment business investment before the net profit of the invested enterprises. For investment enterprises investment previously received cash dividends invested enterprises, investment companies should not be recognized in profit or loss, can only be offset against the investment company's long-term equity investment cost. In such circumstances, I believe that under the following two conditions Long-term equity investments in the accounting cost method is more convenient in use.

(1) when the investment enterprises amounted to more than the cumulative cash dividends received cash dividends receivable, to be invested enterprises at current cash dividend declared × invested enterprises stake, debit "dividends receivable" account, according to the previous year was net realized investment enterprises (investment in corporate investment should be part of) × the proportion of investment holding companies, credit "investment income" account, the difference between borrowing. counted as "long-term equity investments" subjects.

(2) when investment companies received cumulative cash dividends equal to or less than the total cash dividends receivable. Invested enterprises by the year declared cash dividends stake × invested enterprises, debit "dividends receivable" account, if the investment enterprises previously offset against "long-term equity investments" subject. Now and then rushed back to the full "long-term equity investment," subject, debit "long-term equity investment," subjects, according to both the sum, credited to "investment income" account (also in line with invested enterprises mentioned above all cash dividends received by investment companies are investment in the future cumulative net profits generated by the case.)
Example 2: A business on January 1, 2005 to l00 million purchase price of one B share 60% of enterprises, and to pay related taxes 3 million, the funds are paid by bank deposits. B companies achieve an annual net profit and the second beginning of last year's cash dividend announcement issued in Table 2. Links http://www.hi138.com Research Papers Download

According to the data in Table 3. A business on the accounting treatment of the following year
(Unit: million):
1.2005 on January 1, investment:
By: Long-term equity investment 103
Credit: Bank deposits 103
2.2005 In February, the cumulative cash dividends received l2 million> from the investment until the previous year (2004) after the end of the cumulative investment of cash dividends receivable 00,000 yuan, in line with the first case, therefore, Debit "Accounts dividend "l2 million, credited to" investment income "0 million, the difference between the person borrowing" long-term equity investment ", the accounting entries would be:
By: Dividends receivable 12
Credit: 12 long-term equity investment
3.2006 In February, the cumulative cash dividends of 36 million has been received> from the investment until the previous year (2005) after the end of the cumulative investment of cash dividends receivable 18 million, consistent with the first case, therefore, Debit "Accounts dividend "24 million. credit" investment income "18 million people the difference between borrowing" long-term equity investment ", the accounting entries are:
By: Dividends receivable 24
Credit: Investment income 18
6 Long-term equity investments
4.2007 in February. Cumulative cash dividends received 5.85 million yuan> from the investment until the previous year (2006) after the end of the cumulative investment of cash dividends receivable 48 million, in line with the first case, should be debited to "dividends receivable '2 Z8 million, credited to "investment income" 30 million people the difference between borrowing "long-term equity investment." The accounting entries are:
By: Dividends receivable 22.8
72 long-term equity investments
Credit: Investment income 30
5.2008 in February. Cumulative cash dividends received 708,000 yuan "From the beginning to a year investment (2007) after the end of the cumulative investment of 720,000 yuan cash dividend receivable. Consistent with the second case. Shall be debited to" should dividends received "12 million, then" long-term equity investment, "the book have been offset against the future from the purchaser (12 +6-72) 10.8 million. so should be offset against the full reversal of the long-term equity investments, namely, one "long-term equity investment," subject debit. by the combination of the credit, "investment income" account. The accounting entries are:
By: Dividends receivable 12
10.8 Long-term equity investments
Credit: Investment income 22.8
6.2009 in February. Cumulative cash dividends received 1.008 million yuan "From the beginning to a year investment (2008) after the end of the cumulative investment of 1.08 million yuan cash dividend receivable. Consistent with the second case, shall be debited to" should dividends received "30 million, then" long-term equity investment "from the purchaser after the carrying amount is reduced to 0. so counted as" long-term equity investment, "the amount subject to 0. credited to" investment income "account. its accounting entries are:
By: Dividends receivable 30
Credit: Investment income 30 Links to Research Papers Download http://www.hi138.com