Accounting Treatment Method Of The Business Combination And Its Economic Impact

Whether past or present, whether traditional or contemporary energy or manufacturing industry, whether the financial and the Internet industry standing on the air, if which company want to expand the scale or increase productivity quickly in order to occupy a higher market share, get more users or get the resources to achieve higher yields(profits), then, business combinations or acquisitions of other companies is undoubtedly an effective "shortcut", which is an important reason that the Chinese M&A market get into "carnival". In this context, the study of the various accounting methods of business combination and its consequences should be regarded as "the flow".In terms of the development of accounting theory of the business combination,the US Financial Accounting Organizing Committee(FASB) and International Accounting Standards Board(IASB) have canceled the pooling of interests method,their accounting standards goes: business combinations have to use the purchase method. However, our new accounting standards issued in 2006 sticks with the purchase method and pooling of interest method. In recent years, purchase method seems to be the trend in the International Accounting. But, there is not a trace that China wants to give up the equity method, and the reasons will be considered in this paper. In addition, various procedures and differences of consequences in accounting treatment of the business combination will be researched in this paper.Chapter 1 is the introduction part, which will elaborate the research background,the significance of the research, research methods, research ideas, innovations and shortcomings of this paper.Chapter 2 will summarize former scholars’ ideas on whether to abolish the equity method, the economic consequences of various accounting treatment of the businesscombination.Chapter 3 will be a brief summary and backtracking about business combinations.3.1 will put forward a clear definition of business combination. In addition, the type of business combination and China’s "Enterprise Accounting Standards" about the business combination will be concise exposition and set forth in this section. 3.2 will focus on the comparative analysis of the characteristics, differences in accounting practices and their impact on the financial statements and other content of purchase method, the fresh-start method and pooling of interest method. 3.3 will explain three important hypotheses-- the bonus plan hypothesis, the debt covenant hypothesis and political cost hypothesis.Chapter 4 will choose the 2014 financial statements of the Jiuding Investment and the Zhongjiang Real Estate. And at the first, 4.1 will brief analyze their financial situation, and simplify the basis of certain business combination expenses. And then, a variety of different accounting methods will be used for the accounting consolidation process; At the last, there will be comparative analysis of differences of the results in accounting treatment of the business combination, and comparative analysis of the consequences of various consolidated accounting treatment resulting from this basis.Chapter 5 is a summary of the full text, and,by the way, comes up with a few suggestions.The characteristics of this paper is:First, in the theoretical basis part, this paper adds a fresh-start method for the study of the law, and in conjunction with the purchase method and pooling of interest method for a more in-depth comparison.Second, using three different accounting treatments to merge the financial statements of Jiuding Investment and Zhongjian Real Estate, which will more clearly and accurately reflect the different accounting methods in the handler, accounting records, accounting recognition and accounting results and other differences.