Research On Financial Effects And Motives Of Enterprise Combination

Combination accounting serves for merger and acquisition, the importance of which determines the signification of research on combination accounting. Business Accounting Rule N0.20----Business Combination applies the way that coexist the purchase method with the pooling of interests method according to whether under the same control. Using different approach to measure business combination will lead to different accounting result and even different economic result and may also influence the combination itself. To make this issue more urgent, it appears that some corporations take an advantage of defect in the going regulation and rules on business combination accounting to manipulate profit. Such financial fraudulences mislead investors by false information, disorder economy development, and also make optimizes the allocation which is the essential function of mergers and acquisitions unrealizable. At present, the research mostly focuses on the case of the year combined and lack of long-term overall performance of the inspection. So this paper tries to figure out financial condition of the enterprise for a longer period after the combination under the new guidelines, to explore the characteristics of its entire development trends and potential information. Specifically, based on the predecessors'efforts, this paper made a general analysis on the theoretical basis, the nature and characteristics of these two methods. After comparing their differences in accounting practice treatment, it deeply analyzes the combined financial effect of the accounting treatment and manipulation of interest that may exist. Then it speculates the merger motives from the perspective of the accounting treatment. The empirical analysis of the long-term performance will identify if the enterprise is in the interests of speculative (not based on synergy) motive to improve financial performance through the combination. The result indicate that those combinations under the same control which use pooling of interest method are more inclined to speculation than those not under the same control which use purchase method. Thus it is essential to make further improvement of the relevant disclosure of accounting information.