Common Sense Of Accounting -- The Principle Of Accounting In Mergers

The so-called purchase law, as the name implies, is the method of business combination accounting as a paction of an enterprise's purchase of net assets of other enterprises.

(1) the accounting principle of purchase law. In many cases, enterprise merger is often an enterprise buying another enterprise at cash or other costs.

Therefore, merger can be regarded as a behavior of an enterprise buying the net assets of another enterprise.

Since merger is only the net assets of other enterprises, and there is not much difference between the purchase of common assets and the purchase of assets, accounting for business combinations can be handled with the same principle as the purchase of ordinary assets.

Therefore, the purchase method should be accounted for when the enterprises purchase other enterprises.

The accounting principles of purchase law are: 1.. We must confirm and evaluate the assets and liabilities of the purchased enterprises. First, we must confirm the assets and liabilities of the purchased enterprises, revaluate the assets and determine their fair value.

This work should be carried out before the actual merger occurs, and generally entrusted by social intermediary agencies such as accounting firms.

2. it must be determined that the purchase cost should be confirmed and revalued after the assets and liabilities of the purchased enterprise are purchased, and the purchase enterprise and the purchased enterprise need to negotiate to determine the pfer price of the property rights of the purchased enterprise.

The purchase enterprise shall determine the purchase cost according to the pfer price and payment method of the property right.

If the buyer buys it in cash, the purchase cost is the actual amount paid; if the buyer buys the property rights of the purchased enterprise by issuing additional shares, the purchase cost is the fair value of the issued shares; if the purchased enterprise pays the bonds issued, the acquisition cost is the face value of the bonds.

In addition, in the process of merger, there will be other expenses directly related to merger, such as legal fees, commission, etc., which should also be included in the purchase cost.

Other indirect costs associated with mergers, such as the issuance costs of stocks and bonds, will not be included in the cost of the merger, and should be included in the cost of the period.

3., we must compare the purchase cost and the fair value of the net assets of the purchased enterprise. After determining the purchase cost, we can compare the purchase cost with the total value of the fair value of the net assets of the purchased enterprise.

If the purchase cost is greater than the fair value of net assets, the difference is goodwill; if the purchase cost is less than the fair value of net assets, the difference is negative goodwill.

For goodwill, it should be regarded as intangible assets and be directly included in the "intangible assets one goodwill" subject, which will be amortized over a certain period.

For negative goodwill, there are usually two ways of Accounting: (1) directly reduce the fair value of illiquid assets.

The value of monetary assets, short-term investments and accounts receivable in current assets is determined. Generally, it should not be punished and reduced. The long-term stock investment and bond investment in non current assets also have their objective market prices and therefore should not be scashed. Fixed assets, intangible assets, deferred assets and so on usually do not have objective market prices, and their assessment prices often have great uncertainties, so they can be reduced.

In the event of negative goodwill, the value of such assets can be reduced in proportion until the value is reduced to zero.

If such treatment is not enough to offset negative goodwill, the remaining part after the deduction will be regarded as deferred credit, and the profits and losses should be assessed according to a certain period.

(2) the assets purchased are still calculated at fair value, without adjustment, and all negative goodwill is listed as a deferred credit and apportioned within a certain time limit.

(two) the account setting and accounting treatment of the accounting method of purchase; 1., the account of the purchase law shall be set up by an enterprise, and the merger of another enterprise by cash may result in three situations: the first case is that the purchase cost is equal to that.

The fair value of net assets is obtained; the second case is that the purchase cost is greater than the fair value of the net assets acquired; the third case is that the purchase cost is less than the fair value of the net assets acquired.

In the accounting process of enterprise merger, if the purchase cost equals to the fair value of the net assets purchased, there is no need to add new accounting subjects.

If the purchase cost is less than the fair value of the net assets purchased, the "goodwill" details should be set under the "intangible assets" subject.

If the purchase cost is greater than the fair value of the net assets purchased, the "negative goodwill" subject matter should be set under the "deferred credit" subject. The "deferred credit negative goodwill" subject is a liability category, and the lender reflects the negative goodwill arising from the merger. Its borrower reflects the value of the negative goodwill which is amortized on time, and its balance is in the lender, reflecting the negative goodwill that has not been amortized.

If the purchase enterprise adopts the installment payment to pay the pfer of property rights, for the unpaid pfer of property rights, the "payable payable" or "long-term payable" subject should be set up according to the length of the payment period.

2. accounting treatment of the purchase method (1) the purchase cost is equal to the accounting treatment of the fair value of the net assets acquired.

When the purchase cost equals the fair value of the net assets acquired, the purchase company will register the net assets acquired at fair value.

(2) accounting treatment for which the purchase cost is greater than the fair value of the net assets acquired.

When the purchase cost is greater than the fair value of the net assets acquired, the purchase enterprise shall register the net assets purchased according to the fair value, and the difference between the purchase cost and the fair value of the net assets shall be taken as the positive goodwill.

(3) accounting treatment for which the purchase cost is less than the fair value of the net assets acquired.

When the purchase cost is less than the fair value of the net assets acquired, the purchase enterprise shall register the net assets purchased according to the fair value, and the difference between the fair value of the net assets acquired and the purchase cost shall be regarded as negative goodwill.

Besides buying in cash, enterprises sometimes use other ways to merge, and their accounting methods are basically the same as cash purchases.

Next, we take merger and absorption as an example to illustrate the accounting treatment of enterprises in various circumstances when merging.

[case 2-1] assumes that Jiangxi Zhi Dong company acquired all the net assets of Guangdong Meilan company in January 1, 2002 with a cash of 125000 yuan, and assumed all its original liabilities.

The fair value of Guangdong Meilan company's balance sheet data and its assets and liabilities on the date of purchase is shown in Table 2 - 1.

2-1 Guangdong Meilan company's balance sheet amount: $

Project book value, fair value, current assets 3000015000, machinery and equipment (net value) 3000050000, housing (net worth) 4000060000, total assets 100000145000, current liabilities 1000010000, long-term liabilities, 2000020000 shares, 40000 retained earnings, 30000 liabilities and owners' equity. The acquisition cost of Jiangxi Zhi Dong company is 100000 yuan. The total cost of acquisition is 125000 yuan. The fair value of the net assets of Guangdong Meilan company is 115000 (115000) yuan, and the purchase cost exceeds the net value of the net assets obtained. The difference is lO000 yuan, which is recognized as the purchase goodwill and is amortized within a certain period of time and converted to the cost of each period.

The accounting entries compiled by Jiangxi Zhi Dong company on the acquisition date are: borrowing assets: 35000 fixed assets, machinery and equipment 50000 fixed assets, housing 60000 intangible assets, goodwill lO000 loan: current liabilities 10000, long-term liabilities 20000 and bank deposits 125000 [case 2-2] suppose that in the above case, Jiangxi Zhi Dong company paid 100000 yuan purchase cost for the acquisition of Guangdong Meilan company.

In this case, the purchase cost of Jiangxi Zhi Dong company is less than 100000 yuan, which is less than the fair value of the net assets acquired, and the difference is 115000 yuan, with a difference of 15000 yuan.

For this difference, the method of reducing the non current assets can be used to reduce and reduce the amount of the equipment and houses in Meilan company, Guangdong. The amount of reduction can be calculated as follows: the amount to be shared in the machinery and equipment shall be reduced by =15000 x 50000 (5000060000) =6818 (yuan), the amount of the house should be apportioned: 15000 x 60000 (5000060000) =8182 (yuan), the fair value of the machinery and equipment should be deducted from the amount of the amount to be deducted, and the value of the house should be 51818 yuan after deducting the fair value.

According to this, we can compile the accounting entry of Jiangxi Zhi Dong company at the time of purchase merger: borrowing 35000 fixed assets of current assets, machinery and equipment 43182 fixed assets, housing 51818 Loans: current liabilities 10000, long-term liabilities, 20000 bank deposits 100000 [case 2-3] suppose that Jiangxi Zhi Dong company paid only 2000 yuan purchase cost in the process of acquiring Guangdong Meilan company.

Under such circumstances, the purchase cost of Jiangxi Zhi Dong company is 2000 yuan less than that of Guangdong Meilan company's net assets of 113000 yuan, while the fair value of Guangdong Meilan company's illiquid assets is 110000 yuan.

This part of the difference is 113000 yuan in reducing the fair value of non current assets of 110000 yuan, and making it zero, there is still a balance of 3000 yuan.

This part of the balance should be recognized as negative goodwill and credited to the "deferred credit - negative goodwill" account, which can be amortized for a certain period of time and converted into the proceeds of each period.

The accounting entries of Jiangxi Zhi Dong company when purchasing the merger are as follows: borrowing 35000 current assets: current liabilities 10000 long-term liabilities 20000 bank deposits 2000 deferred credits - negative goodwill 3000 [case 2-4]2002 January 1st, Shan Dongjia Chen incorporated Jiangxi Yinhai company through merger and acquisition, acquired all assets of Jiangxi Yinhai company and assumed all its liabilities.

The specific merger method is: Shandong jachen company shares 3 shares of 1 yuan in common stock for 2 ordinary shares of Jiangxi Yinhai company with a face value of 1 yuan.

Assume that Shandong Jia Chen company deals with accounting by purchase method.

Shandong jachen's shares traded on the market at a price of 2.4 to 2.6 yuan per share before the merger.

The fair market price of the company's adjusted stock market is 2.1 yuan, considering the factors such as the decline in the stock price and the cost of the issuance of the shares of Shandong Jia Chen.

The balance sheet data of Shandong Jia Chen company and Jiangxi Yinhai company in January 1, 2002 and the fair market price of the assets and liabilities of Jiangxi Yinhai company, as shown in Table 2 - 2.

Table 2-2 balance sheet of Dongjia Chen company and Jiangxi Yinhai company

(and fair value of porcelain production and liabilities of Jiangxi Yinhai company)

January 1, 2002 amount: $

Project Shandong jachen company book value Jiangxi Yinhai company book value fair value cash

Accounts receivable

Stock

Fixed assets 250000

Three hundred and fifty thousand

Four hundred and thirty thousand

1220000100000

One hundred and sixty thousand

Three hundred and eighty thousand

750000100000

One hundred and fifty thousand

Four hundred and sixty thousand

1000000 accumulated depreciation

Total Assets

current liabilities

Bonds payable

equity

Capital surplus

Retained earnings

Total liabilities and shareholders' equity (300000)

One million nine hundred and fifty thousand

Three hundred and fifty thousand

Zero

One million one hundred and ninety thousand

One hundred and fifty thousand

Two hundred and sixty thousand

1950000 (150000)

One million two hundred and forty thousand

Eighty thousand

Two hundred thousand

Four hundred and fifty thousand

Two hundred and seventy thousand

Two hundred and forty thousand

1240000 (250000)

Eighty thousand

145719 Shandong jachen company makes a merger and acquisition by issuing shares. In its accounting process, several important items and data should be calculated and confirmed. The following are: (1) calculate the number and value of shares issued by Shandong jachen company, and confirm the sum of the merger of Shandong Jia Chen company.

The total number of shares issued by Shandong jachen company is =450000 * 3/2=675000 (shares), and the total value of the shares issued by Shandong jachen company is 675000 yuan (1 yuan per share) (2). For Shandong jachen company, the fair market value of shares issued is greater than the face value, and should be included in capital reserve: 675000 * 2.1-675000=742500 (yuan) (3). The fair market value of common stock issued by Shandong Jia Chen company is larger than the net assets acquired.