Long-term equity investment accounting and tax treatment

[Abstract] the provisions of accounting standards on business Investment and tax business process is different, which also led to long-term equity Investment to acquire, hold and transfer the recorded value and there are some differences between the tax base, and directly affects the current tax payable, in accordance with the <"Enterprise Accounting Standards No. 18, a tax>" (hereinafter referred to as "Tax Code") provisions, the book value of long-term equity Investment difference between the cost and tax shall be based on the balance sheet liability method deferred income tax assets or deferred income tax liabilities, and should also be in accordance with the <"Enterprise Income Tax Law"> and <"Enterprise Income Tax Law Implementation Regulations>> the request of the Investment in current corporate income for tax adjustments. In this paper, the criteria for long-term equity Investment and tax Laws to the provisions of shallow analysis.

[Keywords:] accounting for long-term tax treatment of equity Investments

First, to obtain long-term equity Investment accounting

On long-term equity Investment from the business combination under the same control conditions in the tax Law, in addition to tax-free reorganization of assets, the tax cost of long-term equity Investments to determine as follows: to pay cash, transfer of non-cash assets and liabilities assumed or the issuance of equity securities to determine the fair value of its tax base. and in accounting, business accounting standards under the provisions of the merger on the value of long-term equity Investments accounted for by the merging parties is in accordance with the book value of equity to determine the share of . If the difference between say, then the initial measurement of long-term equity investment in the temporary differences are mainly the combined party's share of book value of equity and long-term equity investments at fair value plus related taxes is the difference between the total . For this is the temporary differences. According to income tax provisions of the Code, in addition to exceptional circumstances, should be in accordance with the income tax rate applicable to measure the future and the deferred income tax assets or deferred income tax liabilities. in the tax treatment should be in accordance with the merger the amount of the related expenses, adjusted by the amount of taxable income; and if it is non-monetary assets of enterprises, then should calculate the transfer of non-monetary assets derived and included in taxable income. For example, as follows: There A, B and the two companies, and the same for the A Group, a subsidiary, in 2008 October 1, a company with the original value of 9,000,000 yuan, 50 million of depreciation has been provided a factory investment in B shares to obtain Company B 80% of the shares, plant and obtain the fair value of the shares were 950 million, Company B on the same day the book value of equity of 1000 million. merger occurs when the Lawyer fees, consulting fees related costs 20 million is assumed that the investment does not involve other relevant taxes and charges, and a corporate income tax rate applicable to 25%, because it is the same under the control of long-term equity investment, then the accounting, the employer shall make the following accounting treatment:
By: Disposal of fixed assets - plant 8.5 million yuan
50 million of accumulated depreciation
Credit: Fixed assets - at cost 9,000,000 yuan
By: Long-term equity investment - cost eight million yuan
50 million capital reserve
Credit: clean up 8.5 million yuan of fixed assets
The costs of the merger should make the following accounting entries:
By: Management fee - attorney consulting fees 200,000 yuan
Credit: 20 million bank deposits
Accounting of deferred tax assets recorded as follows:
By: Deferred tax assets 425,000 yuan
Credit: Income tax expense - 30 million of deferred income tax expense
Capital Surplus - Other capital surplus 125,000 yuan
In terms of tax treatment, because the plant's transfer income of 100 million yuan (950-850), related costs, compared with 20 million, so the tax returns should be adjusted by the amount of taxable income 120 million, increases payable 30 million income tax.

Under common control in a business combination is to merge both companies to voluntarily because of the economic behavior, so in accordance with the provisions of Accounting Standards, such investments are paid for assets, liabilities incurred or assumed, equity securities issued by the fair value and the resulting investment related costs (audit fees, appraisal fee, legal services, etc.) and as a recorded value of. in the tax treatment of the accounting profit or loss on the transfer of assets should be recognized in the corresponding reduced taxable income amount. Links to Research Papers Download http://www.hi138.com Second, in the long-term equity holders of the accounting period

During the long-term equity holders on the main cost method of accounting under the long-term equity investments under the equity method of accounting and long-term equity investments in both accounting. In accordance with the provisions of the relevant criteria, accounted for using the cost method should be the initial investment cost is be declared by the investee denominated cash dividend or profit, are recognized as the current investment interests. and then using the equity method, the investment, if the long-term equity investment is less than the initial cost of investment should have been fair of identifiable assets value of the share should be adjusted according to the difference between the cost of growth equity investments, and also included in operating income.

On the basis of the accounting, business and long-term equity investment is held for the purpose of not only the profits of the invested enterprises, more importantly, the invested enterprises to control or influence. Therefore, in the company during the long-term equity holders within the economic profits of the enterprise can play a regulatory role.

In the long-term equity holders, we have to its costs and gains, dividends, etc. Accounting and division. Which includes accounting for the accounting of the accumulation of dividends and investment income calculation. This is the long-term equity held by the holder to the date from held to maturity with the principal and the profit after the dividend calculation and the corresponding cumulative income in different periods are compared, the right to judge the company from liquidation of long-term equity investment to play the full benefits of this time period. and in the final determine the profits, and then with the first end of a distribution of dividends should be recognized only cumulative dividends or liquidation of accumulated investment income subtraction, we can determine the long-term equity investments held during the business revenue and profits for companies holding long-term equity to make clear judgments, the next quarter and the year whether to continue to hold the shares.

During the long-term equity holders of the holding companies need in the long-term equity investments under the equity method of tax during the holding period to adjust. Shareholding in the business for a long time, not for sale, investment by enterprises as investors Jibei shareholders, in accordance with the proportion of shares held and enjoy certain privileges. in the accounting, the equity method in dealing with long-term equity investments in accordance with the initial investment cost in the long-term holding period of the equity in the investee companies under the Investment changes in the share of owner's equity book value of investments are adjusted net profit that year was invested enterprises, investment enterprises shall be entitled to the share holding proportion, increasing the book value of long-term equity investment (loss adjustment), and confirmed as the current investment income; the event of loss and vice versa. invested enterprises by the end of the fiscal year or are entitled to share of the invested enterprise to achieve the year the net profit or net loss occurred in the share of investment income or loss recognized, and this to the tax adjustment and management.


Third, for the disposal of long-term equity investments accounting

Disposal of long-term equity investment, according to the provisions of long-term equity investment criteria, the actual price achieved should be the difference between the book value of its profit or loss. Using the equity method, the disposal of the investment should be the original owner's equity account of people Part of the corresponding net profits or losses, while the investment write-off of deferred tax assets and deferred income tax liabilities. disposal of long-term equity investment actually made the difference between the price and its tax base should be included in taxable income, and invested enterprises in accordance with applicable tax rates payable income tax.


References:

[1] Wang Jianhua: Accounting for equity investments of [J]. Accounting Communications, 2010 (05)
[2] Bi Jinlan: On the long-term equity investments under cost method of accounting changes and characteristics [J]. Financial Accounting, 2010 (05)
[3] Yang Xiaguang: convert long-term equity investments under the equity method of accounting for the cost of [J]. Business Accounting, 2010 (09)
[4] Zhang Hongxia: Measurement of long-term equity investments [J]. Chinese Agricultural Accounting, 2010 (03) Links to Research Papers Download http://www.hi138.com