The Research On Accounting Issues Of Reverse Merger

Backdoor listing which came into being with the high-speed development of thecapital market is an innovative approach of corporate mergers and acquisitions， itbroadens the ways and channels of company’s financing activities. Direct IPO hasmany limitations， high threshold and long life cycle along with high time cost andhigh cost of capital. In contrast， backdoor listing becomes a short cut of companylisting as it avoids many approval processes and has lower cost and short life cycle.Backdoor listing originated on the capital market of American in1934， andChina’s capital market was established relatively late. Although backdoor listingappeared not in recent years as the first example in Shanghai and Shenzhen was in1993， the concerning accounting treatment practices are very backward. The conceptof reverse mergers was first proposed in "Accounting Standards for Enterprises" inchina until the end of2008. This improvement made up the blank of AccountingStandards， but the concerning guidelines was lack of clear detailed provisions andurgent to be improved.In the academic field， Chinese scholars began the research of backdoor listingfrom the end of the last century， But the research are concentrated on the behavior ofbackdoor listing. Since2011， there was almost nobody who research on specificaccounting treatment of backdoor listing with the exemption of several case study.This article is committed to analyze economic substance of the reverse mergers，point out the deficiencies and reasonableness of the existing accounting standards，learn from the experience of the United States and the International AccountingStandards， and advance appropriate recommendations for improvement.The article can be divided into six parts， The first two parts contain researchbackground， content， methods， the introduction of the research status and theconcerning concept of reverse mergers. The third， fourth parts are the core part ofthis paper， The third part concentrates on the analysis of the economic substance ofreverse merger and the reasonableness and shortcomings of the related guidelines.The fourth part brings forward some of U.S. and international accounting standards that can be used for reference， Part V contains analysis of accounting treatment ofreverse merger in practice， and induction of complex accounting treatment of avariety of different circumstances. The fifth part of the article is a case analysis ofreverse merger between Yinyi Estate company and Gansu Languang company. Wemake the comparison between the goodwill generated from the preparation of theconsolidated financial statements using the provisions of the existing accountingstandards and the goodwill generated from using the approach proposed in this paperto show that we solve the problem in practice to some extent.