The Changes Of Measurement Of Long-term Equity Investments And Study On The Impact Of Company

With the development of the Chinese economy, investment activities become more and more important besides the production and management activities in enterprises. Investments activities become an important part for entities to make efficient use of capitals and raise the rate of earnings. More important, investment activities also can broaden the enterprises relate activities and find new managing directions. Especially since the year of 2005, the non-circulate stock can be released into market, the investment can bring more investment income to the company. So, more and more enterprises will join in the capital market. Accounting information, as a means to facilitate investment decision, is increasingly become an important public goods. The understandability and usefulness of accounting information is critical to the soundness of economic decision and distribution of scared resource for the society as a whole.However, the accounting measurement of investment, especially long-term equity investment, is of relative complex because there are two different accounting treatments, namely cost method and equity method. Worse still, it is also permitted to change from one method to another, causing confusion to accounting information users. Also, the valuation of the investment can differ, ranging from book value to market value. These differences will all undermine the understandability of the accounting information as such.The Accounting Standards promulgated by the Ministry of Finance in February 2006.China's accounting has taken a new milestone. There is a big difference between the old and new accounting standards. Including introduce the fair value to measure the long-term equity investment, the introduction to amortization the goodwill, and use the cost method to subsidiaries. Are these changes will bring economic influence to the enterprise? What will the mangers do to meet these changes? And will this influence the stake holder's decision?This essay is composed of five chapters, and it can be divided into three sections: The first, second and third chapters constitute the first section which is the theory foundation part of the entire essay. This part introduces the background and meaning of this subject first, and then summarizes the research on the long-term equity investment in China. The author also does a research on the history of long-term equity investment in China and analyzes the backgrounds and motivations.The forth chapter constitutes the second section which analyzes the economic influence of the new accounting standard with the case of Younger Group. We find out that the classification of investment has economic influence on the financial report. Also, the valuation of the investment can differ if the company changes the equity method to cost method, ranging from book value to market value. All this means that the change of the measurement would have economic impact and causes the management take actions.The fifth chapter constitutes the third section in which the author points out the contracts and makes the suggestions. It also shows the limitations and the fields for further study.