Long-term equity investments-Long-term investment on stocks

Long-term equity investments/Long-term investment on stocks-What is the long-term equity investment?

Long-term equity investment/Long-term investment on stocks is held by its subsidiary companies, joint ventures and equity investments and joint ventures held by the investee company does not have control, joint control or significant influence, and are not quoted in an active market, can not be reliably measured at fair value of equity investments.

Characteristics of long-term equity investments/Long-term investment on stocks:

① Long-term equity investment is part of the assets in exchange for transferring the business to another non-current assets;

② long-term equity investment and business activities of enterprises in the production of non-current assets held outside;

③ long-term equity investment is a long-term benefits to asking for more rights or interests manifested in the form of assets;

④ long-term equity investment is a higher risk of financial assets.

The type of long-term equity investments
Long-term equity investment /Long-term investment on stocks- (a) control
Control is the power to determine a company's financial and operating policies, and can, according to the company from operating activities to obtain benefits. Companies to implement controls on the investee, the investee company based subsidiary. Normally, when the direct investment enterprise has invested more than 50% of the voting units in the capital, although the direct ownership or investment units by 50% or less of the voting capital, but with substantial control rights, but also that investment companies can control the investment unit.
Invested enterprises have been investing substantial control over whether, by one or more of the following conditions found:
(1) through an agreement with other investors, the investment company has invested more than 50% of the voting capital unit control.
(2) According to the statute or agreement, the investment company the right to control the investee's financial and operating policies.
(3) the right to appoint or remove the board of directors and other members of the majority of similar authority. Although this situation is the unit-invested enterprises have invested 50% or less of the voting capital, but under the statute, agreement, etc. power to appoint the board of directors, in order to achieve essentially control.
(4) The board of directors or equivalent governing body in meeting more than half of the voting rights. Although this situation is the unit-invested enterprises have invested 50% or less of the voting capital, but can control the investment unit of the Board of Directors meetings and the like authority, and thus able to control its financial and operating policies, to reach the essence of control.
Long-term equity investment/Long-term investment on stocks - (b) joint control
Common control is the contractually agreed on an economic activity total control. Common control, only in the economic activity associated with important financial and operating decisions need to share control of the investor unanimous consent. Investment companies and other parties on the implementation of joint control of the investee, the investment unit of the enterprise is a joint venture. Joint ventures and associates and other investments in different ways is characterized by the joint ventures are subject to the parties to the joint venture contract limitations and constraints. Usually in the joint venture set up, the joint venture partners in the investment contract or agreement agreed to set up joint ventures in key financial and production management decision-making process, all parties must agree to the joint venture through. The essence of joint control established by the contract, the joint venture parties to the joint venture total control. Practice, in determining whether it constitutes a common control, they generally can be considered the basis for determining the following:
(1) Any party can not be a joint venture of the separate control of production and business activities.
(2) the basic business activities of joint venture involving the decision-making needs of all parties agreed to the joint venture.
(3) The parties may by contract or joint venture agreements in the form of a joint appointment which side of the joint venture to manage daily activities, but must be in the joint venture parties have agreed within the financial and operating policies of the exercise of management rights.
(C) a significant impact
Refers to a significant impact on the financial and operating policy decision-making powers, but does not determine these policies. Companies able to exercise significant influence over the investee, the investee based business associates. When the investment company directly owned or indirectly through subsidiaries, owns 20% of the invested more but less than 50% of the voting shares, is generally considered to have a significant impact on the investee. In addition, although the investment company has invested 20% of the voting units in the capital, but one of the following conditions should also be recognized as investment units have a significant impact:
(1) of the investee's board of directors or equivalent governing body is represented. In this case, because of the investee's board of directors or equivalent governing body is represented, and enjoy the corresponding rights of substantive decision-making, investment companies can be invested by the unit represented in the policy-making, so as to achieve the exercise significant influence over the investee.
(2) The Company participates in the policy making process. In this case, since they can be involved in policy-making process in policy-making process can make recommendations for their own interests and views, which can be invested for the exercise significant influence.
(3) and is an important investment transactions between units. The transaction because of the daily operations of the investee importance, and thus to some extent, can affect the production of the investee business decisions.
(4) to be of managerial personnel. In this case, by investing in business-to-be of managerial personnel, management personnel have authority and responsibility to be investing in the financial and business activities, thereby able to exercise significant influence over the investee. (5) units to be invested to provide key technical information. In this case, because they are investment units of investment in production and business activities of enterprises need to rely on technology or technical data, and thus that investment companies have been investing a significant impact.
(D) no control, joint control or significant influence
No control, joint control or significant influence of specific performance is as follows:
(1) the direct investment enterprise has been below 20% of the investment unit of the voting capital, while there is no other way to implement a significant impact.
(2) the direct investment enterprise has been invested by 20% or more of the voting capital, but in fact to be invested does not have control, joint control or significant influence.

Undo edits

Significance of long-term equity investments:

Long-term equity investment is to acquire another business enterprise conducted by long-term equity investments, usually long-term holding, not ready to cash, invested enterprises invested enterprises as shareholders. Long-term debt with short-term investments and investments in different long-term equity investment is not the primary purpose of investment income in order to obtain the near future, but to strengthen and other companies (such as the company's suppliers of raw materials or commodities dealers, etc.) and commercial ties, or to influence or even control its associated company's major business decisions and financial policies. Equity represents an ultimate ownership, the owner of the business reflects the management and allocation of voting rights gains. Long-term equity investment obtained by other enterprises equity investment enterprises invested enterprises can participate in major business decisions, which affect, control or force the action in favor of invested enterprises invested enterprises in the interests of the business policy and profit distribution. Meanwhile, the long-term equity investments, or to achieve diversification and reduce the risk of the industry system is an effective way.

 

Long-term equity investments(Long-term investment on stocks) accounted for:
1. The formation of a business combination under common control of long-term equity investment

According to merger guidelines stipulates that a business combination under common control, the company is involved in the merger before the merger are subject to the same party or parties the same ultimate control and that control is not a temporary situation.

The merging parties should be made ​​in accordance with the merger on the merging parties share book value of equity as a long-term equity investment in the initial investment cost.

In accordance with the merger the merging parties should have been the book value of equity share of long-term equity investments as the initial investment cost should be considered on the premise that the merging parties prior to the merger the merging parties with the accounting policies adopted should be consistent. Before the merger the merging parties and the merging parties used different accounting policies shall be in accordance with the accounting policies of the merging parties are merging parties, assets, liabilities, adjusted book value on the basis of the calculation to determine the formation of long-term equity investment in the initial investment cost.

2. Under common control entities into the same long-term equity investment under the control of the holding of non-merger, the purchaser shall determine the cost of the business combination as a long-term equity investment in the initial investment cost. Including the purchase of a business combination costs paid by the assets, liabilities incurred or assumed, the issue of equity securities at fair value and for the merger of the direct costs associated with the occurrence of and. Should be the date of purchase at the cost of business combination, debit "long-term equity investments", according to the investee has been declared but unpaid dividends or profits the cash, debit, "dividends receivable" account, according to pay the book value of the merger on price , credited or debited to the relevant liabilities of the asset account, the direct costs associated with its occurrence, credited to "bank" and other subjects, their difference, credited to "operating income" or debit "operating expenses" and other subjects . In relation to stocks of commodities as the merger on prices, shall be the fair value of stock merchandise, credited "the main business income" subject, and also carry associated costs.