Accounting Treatment Of Listing Company By Reverse Acquisitions

U.S. capital markets as early as1934there have been reverse the purchase, in1993, with the continuous development of China’s capital market, China’s first case of reverse purchase listed appear, first proposed in2008’s "Enterprise Accounting Standards explain" the specification reverse purchase transactions on the capital market to achieve backdoor listing through a reverse way to buy has become the focus of attention. However, the relevant provisions of Accounting Standards imperfect, related accounting treatment is not uniform, not standardized, which seriously damaged the interests of investors and the stability of the entire capital market.This paper analyzed several recent cases of reverse acquisitions according the study of IFRS and ASBE, and proposed a new method of accounting treatment to handle such case. It can be used as reference for accounting treatment of listing company by reverse acquisitions. The details are as follow.(1) In Explanation to Accounting Standards for Business Enterprises (2010), according to the guidelines related to accounting treatment of indirectly listing company by reverse acquisitions, it mainly uses the experience of the research result of IFRS, and normalizes the standards of accounting practice. Since there are differences among individual countries in terms of the economy environment, the legal system and the quality of the uses of financial statement and accountants, the guidelines of the accounting treatment of reverse acquisitions don’t match the rules of economic situations and regulatory environment of China. This paper suggests localizing the guidelines according to the actual situation of China.(2) During the process of accounting treatment of reverse acquisitions, the listing of the equity of consolidated financial statement should be in accord with the equity of the legal parent company. Besides, it will help the users of financial statement to better understand and make decision if revealing the detailed calculation process of the initial equity number as explanatory notes appended to the financial statement.(3) During the process of accounting treatment of reverse acquisitions, the calculation of EPS should consider the actual situation of the organization restructuring proposal, and calculate the weighted equity number of EPS based on the factors of the replacement of assets, the equity of original shareholders of the listed company and cash consideration. It should objectively reflect the EPS and profitability of the listed companies after merged.