Cross-shareholding means that in an enterprise group composed of a parent company and a subsidiary company, the parent company holds and can control a certain proportion of the shares of the subsidiary company, and the subsidiary company also holds a certain proportion of the shares of the parent company, that is, it holds each other's shares.
In the case of cross-shareholding between parent company and subsidiary company, when preparing consolidated financial statements, the equity of subsidiaries held by the parent company is the same as the long-term equity investment of the parent company and the merger and offset of owners' equity of subsidiaries under normal circumstances. For the equity of the parent company held by the subsidiary, it should be converted into treasury shares in the consolidated financial statements according to the initial investment cost of long-term equity investment confirmed on the day when the subsidiary acquired the equity of the parent company, as a deduction of owner's equity, which is shown as "reduced treasury shares" in the consolidated balance sheet. The investment income (such as profit distribution or cash dividend) confirmed by the subsidiary holding the equity of the parent company is offset. If a subsidiary classifies the equity held by the parent company as available-for-sale financial assets, it shall measure it at fair value, and offset the cumulative changes in fair value confirmed by the subsidiary.