The Principles Of Consolidated Financial Statements And The Use Of The Relevant Theory Research

Business combination is one of the hot topics in the global economy and research onconsolidated financial statements is essential to the development of financial accountingtheory and practice. This thesis addresses how the changes in ownership interests insubsidiaries will affect the ownership percentage held by the parent company andconsequently the separate and consolidated financial statements.This thesis starts with a discussion of the relations of business combination andconsolidated financial statement. The underlying theory and the limitations ofconsolidated financial statements are reviewed. The thesis then discusses the scope andmethod of consolidation, and issues related to the preparation of consolidated financialstatements.Part3of this thesis reviews transactions and events that result in changes inownership interests in subsidiaries. These transactions and events are classified into twotypes based on whether they are initiated by the investor or the investee company. This partthen discusses how these transactions and events will change the investee company’s roleas a subsidiary, a joint venture or an association.Part4of this thesis discusses how the parent company’s activities will impact its ownfinancial statements and the consolidated financial statements. These activities include theacquisition of new subsidiaries, changes to the ownership structure in subsidiaries, andtransfer or disposal of equity investments.Part5of this thesis discusses how the subsidiary company’s activities, including theissuance or repurchase of common shares, the conversion of convertible securities, and theexercise of share options, will affect its own financial statements and the consolidatedfinancial statements. This part also reviews the accounting for goodwill arising inbusiness combinations, long-term equity investment, minority interests and their impact onthe consolidated financial statements.The last part of this thesis offers recommendations to the formulation of corporateaccounting standards. Implementing these recommendations will improve the accountingpractice as well as facilitate the convergence of Chinese accounting standards with theinternational accounting standards.