Research On Some Accounting Issues Of Merger By Contract

Merger by contract is a new way to control other entities. An entity could control another entity’s activities and finance by signing contracts which is different from those acquisitions through buying stocks. In our country, in order to be list overseas, some investors establish a corporation overseas which meets the demands to be list first. Then, the corporation sets up a wholly foreign-owned subsidiary in our country which signs a series of contracts with another company. Though above contracts, the latter company’s operating activities and finance decisions are controlled by the wholly foreign-owned subsidiary. According to the contracts, the company ought to transfer its earnings to the wholly foreign-owned subsidiary. Now there are few studies and no related accounting standards about merger by contract. By contrast, IASB and FASB have draft a set of standards guiding merger by contract in recent years. Therefore, I hope to study International Accounting Standards and Generally Accepted Accounting Principles to afford some advice to our Accounting Standards for Business Enterprises on the basis of our accounting environment.This article is divided into four parts:The first part, which is called Introduction, mainly introduces the background study on the significance, contents and methods, this major effort to break through problems and limitations. The second part focuses on introducing the conception of merger by contract and related theories. By contrast with merger through purchasing stocks, the characters of merger by contract would become clear. After introducing International Accounting Standards and Generally Accepted Accounting Principles related to merger by contract, here comes the third part. The case Alibaba would be introduced and analysis in this section which exposes problems in business. The forth part is mainly about advice and suggestions to our Accounting Standards for Business Enterprises. After distinguishing the different between overseas and our country’s accounting environment, the writer try to find out the suitable way to deal with merger by contract in our country.Through the above, the writer considers the essence between International Accounting Standards and Generally Accepted Accounting Principles is the same which requires to bring the merger by contract into the extent of acquisition. While in the area of the accounting recognition, measurement and reporting, Generally Accepted Accounting Principles is more specific and systematical. Especially in the measurement of risk, FASB afford the detailed method and reporting demands.After studying the cases in business, the writer finds out that companies should pay more attention to the data listing and information reporting. The writer hopes that through the last parts, accountants would attach more importance to the merger by contract to afford an objective and transparent accounting environment for the users of financial statements.