Some Thoughts On Consolidated Financial Statements

I. the logical starting point of the consolidated financial statements Theory -- the consolidated accounting entity

The logical starting point of consolidated financial statement theory is the merger of accounting entities.

The main reasons are as follows: (1) consolidated financial statements arise from the merger of accounting entities, which is a new accounting entity that pcends individual accounting entities, and there is no consolidated financial statement without consolidated accounting entities. Of course, there is no need to study merger theory, merger method, merger procedure and scope of merger. Secondly, the combined accounting entity has an impact on the traditional accounting entity hypothesis, but has not fundamentally shaken the theoretical framework of financial accounting. In the theoretical framework of financial accounting, we should study the special problems of consolidated financial statements according to the particularity of consolidated accounting entities.

It is precisely because of the different understanding of the relevant aspects of the merged accounting body that different theories and approaches are formed.

Two. Prerequisites and conditions for incorporation.

Generally speaking, the limits of accounting entities define the spatial scope of accounting.

For the consolidated financial statements, the limits of the consolidated accounting entity also define the scope of the merger.

The prevailing view of "parent company" is based on control, emphasizing that control is the theoretical basis for determining the limits and scope of merger of accounting entities.

Control is the power to control an enterprise's financial and business decisions and to gain benefits from the business activities of the enterprise.

1. the premise of incorporating the scope of equity capital investment.

For controlling units, report consolidation is necessary.

To control a company's financial and business decisions must be based on equity capital investment.

Equity capital refers to capital that has the right to vote and can participate in the company's management decisions.

Without such investment, we can not participate in the company's management decisions, nor control the company's financial and operational decisions.

Only when the parent company's equity capital investment is accepted can it become a subsidiary controlled by the parent company and incorporated into the merger scope.

2. the conditions for inclusion in the scope of consolidation are sustained and effective.

Not all companies that accept equity capital investment should be included in the scope of merger. Only a subsidiary whose parent company can continue to control effectively should be merged.

Continuous and effective control means that in the foreseeable future, a subsidiary will continue to operate, and the parent company intends to continue and effectively control the subsidiary's financial and operational decisions.

Only in this way can the parent company get a stable interest from this control, and the parent company and its subsidiaries can truly become a relatively stable whole with common interests and common risks.

A subsidiary whose parent company is unable to control, can not effectively control or only temporarily control can not be included in the scope of merger, for example, a subsidiary that is ready to close down, and a subsidiary that has been declared and cleaned up by bankruptcy proceedings, a subsidiary that has been declared bankrupt, a subsidiary that is prepared to sell more than half of its equity capital in the near future, and a non continuous owner's equity.

Three. The mode of consolidated financial statements -- the combination of merger theory and consolidation method.

At present, there are two debates on consolidated financial statements, which are merger theory and merger method.

Most of the research results are concerned with these two problems, and some individual research results hold that there is a hierarchy or hierarchy between them.

The author believes that the two are both theoretical and practical problems, and are at the same level of theoretical and practical issues.

Theoretically, they are two different aspects of the merged accounting entity. In practice, they involve recognition and measurement respectively.

The merger theory is about the merger of parent subsidiary relationship and minority shareholder status in the accounting entity, and decides whether or not to confirm the assets and liabilities enjoyed by minority shareholders, minority shareholders' rights and interests and minority shareholders' profits and losses.

Mainly involves: (1) when consolidated financial statements of subsidiary companies are consolidated or proportionate, that is, whether the assets and liabilities of minority shareholders, minority shareholders' rights and interests and minority shareholders' profits and losses are recognized; secondly, if we confirm minority shareholders' rights and interests and minority shareholders' profits and losses, what elements are they identified?

The merger method is the understanding of the way of establishing the merged accounting entity, and thus determines the measurement basis of the assets and liabilities that the parent subsidiary company has already existed on the merger day.

Different merger theories and merger methods can be combined into a variety of consolidated financial statements, that is, "consolidated financial statements mode".

For the same merger business, there will be different confirmation and measurement results according to different consolidated financial statements mode.

Four. The process of compiling the consolidated financial statements - reconfirmation and measurement

Consolidated financial statements are group financial statements made by enterprise groups as a single accounting entity - consolidated accounting entity.

The compiling procedure has the following characteristics: (1) because the consolidated accounting entity does not set up account books, the consolidated financial statements are based on the individual financial statements of the parent company and the subsidiary company, which are mainly recognized, measured and reported, and there is no record procedure. Second, because of the different accounting entities, there are differences in the confirmation and measurement between individual financial statements and consolidated financial statements. Therefore, consolidated financial statements are not a simple summary of individual financial statements, but should be reconfirmed and measured on the basis of individual financial statements.

First, consolidated financial statements should reflect the financial impact of pactions or events occurring within a certain period of time.

However, due to the possibility that an outside subsidiary may choose an accounting period different from the parent company, the time range of the pactions or events reflected in its individual financial statements is different from that of the parent company, so it should be adjusted.

That is to say, in accordance with the accounting period determined by the consolidated accounting entity, the financial impact of pactions or events within the period of the enterprise group is reconfirmed and measured.

Secondly, the consolidated accounting entity should adopt the same accounting policy for the same paction or matter as a single accounting entity, so the financial statements of subsidiaries should be adjusted according to the accounting policies different from the parent company's accounting policies.

That is to say, in accordance with the accounting policy of the merged accounting entity, the financial impact of the pactions or events of the subsidiary company will be reconfirmed and measured.

Thirdly, a financial statement of an accounting entity should adopt a unified currency.

If the financial statements of the subsidiary companies incorporated in the consolidated financial statements are made in foreign currencies, they should be converted into the parent company's compiling currency.

Finally, the financial impact on the group's internal pactions, that is, the difference between the confirmation and measurement of individual financial statements and consolidated financial statements, including the elements and items of confirmation, confirmation and confirmation, and the amount of confirmation, need to be reconfirmed and measured in the preparation of consolidated financial statements.

If the parent company sells its goods to a subsidiary as a fixed asset, from the parent's perspective, the risks and rewards related to the ownership of the asset have been pferred and meet the other standards of income recognition, so we must confirm the sales revenue and carry forward the cost of sales.

However, from the perspective of the consolidated accounting entity, the risks and rewards related to the ownership of the asset have not been pferred out of the consolidated accounting entity enterprise group, so it does not meet the recognition standard of income, and the internal sales revenue and sales cost should be offset.

Yes

In the historical cost of the asset, the subsidiary considers it to be the cost when it purchases the assets from the parent company, while the consolidated accounting entity considers that the cost (i.e. the cost when the parent company purchases the asset) is the cost of the enterprise group's acquisition from the outside, so the internal profits included in the asset should be offset and the depreciation should be offset.