Specific Procedures For Preparing Consolidated Statements By Direct Merger Method

When the direct merger method is used to consolidate financial statements, in addition to compiling the consolidated working draft form, the relevant figures of the individual financial statements of the parent company and the subsidiary company should be pferred to the respective projects. The report data of the subsidiary companies should be adjusted mainly, that is, those (1) and (2) of the "adjustment entries" listed above, including: (1) adjusting the subsidiary company's financial statements according to the accounting policies of the parent company and the accounting period; (2) adjusting the subsidiary financial statements based on the fair value of the purchased assets and liabilities on the basis of the fair value of the purchased assets under the same control.

Those who increase net assets will debit the relevant assets and liabilities, credited "capital reserves", and reduce the net assets. Instead, the net assets should be adjusted accordingly, and the related assets depreciation, amortization and cost carrying should be adjusted accordingly.

1. offset the equity investment among enterprises in the group.

The equity investment between parent company and subsidiary company belongs to the internal paction of enterprise group, so it should be set off.

The offsetting of the parent company's investment in the subsidiary company is that: according to the paid up capital recorded by the subsidiary company belonging to the parent company, the item is debited, and the long-term equity investment project is credited according to the book balance of the parent company's investment to the parent company.

Project.

2. offset the profit of the parent company in determining the cash dividends of the subsidiary.

When the cost method accounts for long-term equity investment, the cash dividends of the subsidiaries are recognized as investment income. In fact, this profit is also generated by the internal capital movement of the enterprise group, which should be offset according to the principle of the consolidated statements.

When an offset is made, the "investment income" item is debited and the "undistributed profit" item is credited.

3. offset the impact of other internal pactions on consolidated statements.

Other internal pactions, including the items (1) to (7) of the "offsetting entry" listed in the second part of the article, and the non controlling equity investment between them, are the same as those described in the explanation.

4. calculate the income and loss of minority shareholders and minority interest items.

Under the direct merger method, the record of the parent company's profit and loss has been cancelled according to the net profit share recognized by the subsidiary company. The long-term equity investment of the parent company is only limited to offset the cost of investment of the parent company and the paid up capital and the corresponding capital premium of the subsidiary to the parent company, so it can no longer confirm the profit and loss and the rights and interests of the minority shareholders by the offset method, so it needs to be calculated directly.

The calculation methods are as follows:

Profit and loss = net profit of the subsidiary after adjustment and offset, the proportion of minority shareholders.

Net profit attributable to the parent company = the "combined amount" of the net profit of the consolidated statements - minority shareholders' profits and losses

Minority shareholders' equity = proportion of the ownership of the owner's equity of the subsidiary after the adjustment and offset

Shall be attributable to the total amount of owners' equity of the parent company = the combined amount of the owners' equity of the consolidated statements - minority shareholders' rights and interests.

In addition, the consolidated income statement requires the completion of "other comprehensive income".

In addition to the net profit and loss (net cash dividend) of a subsidiary, the net assets of subsidiaries are increased or reduced.

When adopting the direct merger method, the other comprehensive income of the subsidiary company should be directly included in the "other comprehensive income" items in the "individual financial statements" column of the consolidated income statement of the manuscript, the amount = the net asset increase of the subsidiary company during the period of holding up (minus the negative number)) - the net profit of the subsidiary company in the same period (net loss is counted as negative number) and the cash dividends allocated by the same period subsidiary company (all in the individual financial statements number).