Analysis On Enterprise Group Consolidation Scope And It’s Enlightenment

With the worldwide en terprise groups speeding up the process and the growing needs of financial information from the different users,mergers and acquisitions activity is increasing.How to prepare consolidated financial statem ents reasonably and appropriately is important to reflecting the financial position,operation results and cash flow of whole enterprise group,and to enterprise value assessm ent and invest ment decision of investors.All this tim e,enterprise merger is considered to be one of the difficult problems in financial accounting field.And the judgement on enterprise group cons olidation scope is the key elem ent of the truth and accuracy of consolidat ed financial statement.At present,with the com plexity of investment relationship and c ooperation among enterprises,the popularity of equity deals and strategic alliances increase the difficulty of preparing consolidated financial statem ents,especially the judgement on enterprise group consolidation scope.The International Accounting Rules emphasize the im portance of “control”,rights and economic benefits and the relationship betw een them.The definition and judgem ent of control rely entirely on the substance-over-form principle,we should m ake concrete analysisin accordance with specific conditions.W hen the contracts am ong enterprises become more complex,there should be m ore careful to judge the sc ope of consolidated financial statements and make analysis in deta il on the co ntracts.In the sam e way,if the contracts change,we need to identify the scope again.Because the change of the contracts may cause the scope to change,and then ha ve a significant influence on the financial position,operation results and cash flow of whole enterprise group.This paper focuses on the scope of consolidated financial statements and the methods of case analyzing and theory research is adopted durin g this paper.The chapter one is introduction which mainly introduce the background and significance,literature review,the main contents and research methods and innovation and the insu fficiency.The chapter two starts with the core of co nsolidated statements “control”,respectively introduces the developm ent of "control" and definition regulations in th e American accounting standards,international accounting standards and China’s new accounting standards.At the end of chapter two,the author link the consolidation scope,enterprise value assessment and contract together,and introduce the relations with them.The chapter three mainly introduces A Company signed two contracts,the details of the two contract s and the im pact on consolidation scope of A Company.The last chapter is case study,this chapter combines the theory of chapter two and the real story,and analyses the im pact on consolidation scope through the contract,and A Company adjust the consolidation scope by singing the contract.Meanwhile A company provide the strategic direction through the consolidated financial statements.And B company could not be included in the consolidation scope of consolidated financial statements because of the contracts to achieve th e goal of earnings m anagement and make the enterprise value meet the expectations.This paper analyses that the enterprise should considerate the “control” definition in Chinese Accounting Standard when adjust the consolid ation scope.In this case study,A Company achieved the goal that not incl ude the B Com pany into the consolidation scope by signing contracts.We can know that when the enterprise want to cha nge the strategic direction,not include the subsidiaries or m anage earnings by the adjustm ent of consolidation scope,contract would be the one of the reasonable methods.Design by contract,to som e degree,can make enterprise achieve th e strategic goal.When the contract design is based on the accounting standards,the company can achieve their strategic goals by signing the contract,but it may also bring substantive challenges to the regulator.