Business combination is a transaction or event that combines two or more independent enterprises to form a reporting entity. So what are the key points of financial and tax treatment and audit of enterprise merger? Let's get to know it together!
First, the concept of enterprise mergers and acquisitions
Enterprise merger refers to the merger into one enterprise in accordance with relevant laws, including absorption merger and new merger; By purchasing or exchanging equity, it becomes a legal act that enterprise groups need to prepare consolidated accounting statements according to law, including absorption merger, new merger, holding merger and so on. From the perspective of company law, merger can be divided into three categories: the first category is absorption merger, A+B=A, and B loses its legal personality. The second category is the newly established merger, where A+B=C, A and B lose their legal personality and a new legal entity C is formed. The third category is equity merger, which is a kind of merger realized through equity. Example: Company A owns a wholly-owned subsidiary, A, and sells A to C. The original line between A and A is interrupted, and then a new line appears, and C owns 100% equity of A. This situation is to merge the new controlling rights and then produce a new reporting entity. The original consolidated financial statements were that A and A were the main bodies of consolidated financial statements, but now the main bodies of consolidated financial statements have changed, and C and A have become consolidated financial statements.
Second, the accounting treatment of business combination
Business combination is a transaction or event that combines two or more independent enterprises into a reporting entity. Business combination is divided into equity combination under the same control and purchase method under the same control, so two different methods are put forward in accounting treatment.
(1) The merger of enterprises under the same control adopts the equity combination method.
Equity combination method, that is, the assets and liabilities of the merged party are confirmed according to the original book value, but not adjusted according to the fair value, and no goodwill is formed. Equity items are adjusted according to the difference between the merger consideration and the share of net assets obtained in the merger. Under the combination of rights and interests method, business combination is regarded as a combination of rights and interests of enterprises rather than a purchase transaction. The parties involved in the merger shall merge according to the book value of their net assets. After the merger, the rights and interests of the merged entity will not increase or decrease due to the merger.
1. Confirmation of comprehensive cost. The assets and liabilities acquired by the merging party in the business combination shall be measured according to the book value of the merged party on the merger date. Adjust the capital reserve for the difference between the book value of the net assets acquired by the merging party and the book value of the merger consideration paid (or the total face value of the issued shares); If the capital reserve is insufficient to be offset, the retained earnings shall be adjusted.
2. Handling of merger expenses. All relevant expenses incurred by the merging party due to the merger, including audit fees, evaluation fees, legal service fees, etc. , should be included in the current profits and losses when it occurs; The handling fees and commissions paid by enterprises for issuing bonds or other debts in combination shall be included in the initial measurement amount of issuing bonds and other debts; Fees, commissions and other expenses incurred in issuing equity securities in a business combination shall offset the premium income of equity securities. If the premium income is insufficient to be offset, the retained income shall be offset.
3. Preparation of consolidated financial statements of the merging party. If the parent-subsidiary relationship is formed in the merger, the parent company shall prepare the consolidated balance sheet, consolidated income statement and consolidated cash flow statement on the merger date. The assets and liabilities of the merged party in the consolidated balance sheet shall be measured according to their book values; The consolidated income statement shall include the income, expenses and profits of all parties involved in the merger from the beginning of the current period to the merger date, and the net profit realized by the merged party before the merger shall be reflected in a separate item; The consolidated cash flow statement shall include the cash flows of all parties involved in the merger from the beginning of the current merger to the merger date.
(2) Purchase method is adopted for business combination not under the same control.
When an enterprise purchases the transactions of other enterprises, it shall conduct accounting according to the purchase method, and confirm the assets and liabilities obtained according to the fair value. The purchase method regards merger as a purchase behavior and pays attention to the actual value of assets and liabilities on the completion date of merger.
1. Determination of merger cost. The merger cost shall be measured according to the fair value of assets paid by the buyer, liabilities incurred or assumed and equity securities issued. The details are as follows: (1) For business combination realized through exchange transactions, the combination cost is the fair value of assets paid, liabilities incurred or assumed and equity securities issued by the buyer on the purchase date. (2) For a business combination realized step by step through multiple transactions, the combination cost is the sum of the fair value of the equity of the acquiree held by the purchaser on the purchase date (or trading day) and the fair value of other considerations paid on the purchase date. In the merger contract or agreement, if the future events that may affect the merger cost are agreed, and it is expected that the future events are likely to occur on the purchase date and the impact on the merger cost can be reliably measured, the buyer shall include them in the merger cost.
2. Handling of consolidated differences. There are three ways to deal with the consolidated variance. (1) The difference between the fair value and book value of the original investment held by the buyer on the purchase date, as well as the difference between the fair value and book value of assets abandoned, liabilities incurred or assumed and equity securities issued due to business combination are included in the current profit and loss; ② On the purchase date, the buyer recognizes the difference between the merger cost and the fair value share of the identifiable net assets of the acquiree obtained in the merger as goodwill; (3) On the purchase date, if the merger cost is less than the fair value share of the identifiable net assets of the acquiree obtained in the merger, the purchaser shall first review the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree and the measurement of the merger cost. After review, if the merger cost is still less than the fair value share of the identifiable net assets of the acquiree, the difference shall be included in the current profit and loss.
3. Handling of merger expenses. The direct expenses incurred by the purchaser due to business combination shall be included in the business combination cost. The issuance expenses of issuing equity securities shall offset the premium income of issuing equity securities, and if there is no premium or the premium is insufficient, the retained income shall be offset.
4. Preparation of consolidated financial statements of the buyer. If the parent-subsidiary relationship is formed in the business combination, the parent company shall prepare the consolidated balance sheet on the purchase date, including the identifiable assets, liabilities and contingent liabilities of the acquiree obtained as a result of the business combination, and present them at fair value. The difference between the merger cost of the parent company and the fair value share of the identifiable net assets of the subsidiary company can be recognized as goodwill or listed as current profits and losses.
Three, the tax treatment of enterprise merger
According to the Notice on Income Tax Related to Business Combination and Separation of Enterprises (Guo Shui Fa [2000]1KLOC-0/9No.) and Article 52 of the Enterprise Income Tax Law, except that the enterprise groups paying enterprise income tax are the same as those under the same control, other enterprises should treat the merged enterprise and the merged enterprise as different taxpayers.
(1) taxable consolidation
According to the provisions of the Notice on Income Tax Related to Enterprise Merger and Separation (Guo Shui Fa [2000]1KLOC-0/9), the merged enterprise shall be regarded as the income from asset transfer obtained from the fair value transfer and disposal of all assets, and shall pay income tax according to law. The losses of the merged enterprise in the previous year shall not be carried forward to the merged enterprise to make up. When the merged enterprise accepts the related assets of the merged enterprise, it can determine the cost according to the value confirmed by the evaluation. Shareholders of the merged enterprise obtain the equity of the merged enterprise as liquidation distribution. ? Specifically, the tax treatment methods of both parties are as follows:
1, tax treatment of merged enterprises. No matter how it is handled in accounting, it is required to calculate the income from property transfer for the merged enterprise, that is, the cash and other costs paid by the merged enterprise for the merger MINUS the tax cost of the net assets of the merged enterprise on the base date, and the income from property transfer is included in the taxable income of the current period. If the merged enterprise has uncompensated losses before the merger, it can be offset by the income from property transfer, and the balance should be subject to enterprise income tax. Losses that are insufficient to make up shall not be carried forward to the merged enterprise for making up.
2. Tax treatment of the merged enterprise. If the consolidated price paid by the merged enterprise includes non-cash assets, the non-cash assets shall be treated as sales and income tax shall be paid. In addition, there is no obligation to pay income tax. At the same time, when the merged enterprise accepts the assets of the merged enterprise, it can determine the cost according to the value confirmed by the evaluation.
(2) Tax-free merger
If the enterprise reorganization meets the following conditions at the same time, the special tax treatment provisions shall apply: (1) It has a reasonable commercial purpose, and its main purpose is not to reduce, exempt or delay the payment of taxes. (2) The proportion of assets or equity of the acquired, merged or split part conforms to the proportion stipulated in the tax law. (3) The original substantive business activities of the restructured assets will not be changed within 12 months after the reorganization of the enterprise. (4) The proportion of equity payment involved in the consideration of the restructuring transaction conforms to the provisions of the tax law. (5) The original major shareholder who has made equity payment during enterprise reorganization shall not transfer the acquired equity within 12 months after reorganization. Tax-free merger is only applicable to business combinations that meet certain conditions, that is, business combinations in which the amount of non-equity payment is not higher than 20% of the face value of paid equity, which can basically be classified as stock exchange merger. Relevant tax treatment measures are as follows:
1, tax treatment of the merged enterprise. The merged enterprise does not confirm the gains or losses of all assets transfer, and does not calculate and pay income tax. All enterprise income tax matters before the merger of the merged enterprise shall be borne by the merged enterprise. If the losses in the previous year did not exceed the statutory compensation period, the merged enterprise can continue to make up for them with the income related to the assets of the merged enterprise in the following years. Specifically, it is calculated according to the following formula: the income that can make up the losses of the merged enterprise in a tax year = the income of the merged enterprise before making up the losses in a tax year? The fair value of the net assets of the merged enterprise? The fair value of all the net assets of the merged enterprise after the merger.
2. Tax treatment of the merged enterprise. Except for a few non-monetary and non-equity payments, the merged enterprises are regarded as sales, and basically do not need to pay taxes. The taxable cost of accepting all assets of the merged enterprise by the merged enterprise shall be determined on the basis of the original net book value of the merged enterprise. For example, when Enterprise A merges with Enterprise B, although the fair value of the net assets of Enterprise B is 60 million yuan, its book value is 50 million yuan, and the merged enterprise can only use 50 million yuan as the tax basis for accepting assets.
The actions of all parties involved in the merger should be consistent. All parties involved in the same restructuring business should adopt consistent tax treatment principles, either general tax treatment or special tax treatment.
4. Equity payment and non-equity payment should be treated differently and treated separately. When M&A involves the income tax treatment of all parties according to the special tax treatment method, the equity payment part of the transaction will not confirm the transfer gain or loss of the relevant assets for the time being, and the non-equity payment part should still confirm the corresponding asset transfer gain or loss during the current transaction, and adjust the tax basis of the corresponding assets. Specifically, it is calculated according to the following formula: Lossable income from asset transfer corresponding to non-equity payment = (fair value of transferred assets-tax basis of transferred assets)? (Non-equity payment amount? Fair value of transferred assets).
From the above analysis, it can be seen that the choice of accounting treatment methods will basically not affect the taxable income and actual taxable amount of the merging party, but different choices of accounting treatment methods may affect the complexity of tax adjustment and the difficulty of tax treatment. On this basis, the consistency of accounting treatment and tax treatment should be considered as much as possible.
Four, the enterprise merger should pay attention to the audit matters
According to Chinese laws, the annual accounting statements of state-owned enterprises, foreign-funded enterprises and listed companies must be certified by certified public accountants before submission. At present, the information of state supervision of listed companies mainly comes from the accounting statements of listed companies and audit reports issued by certified public accountants. Auditing the accounting statements of listed companies by certified public accountants has, to some extent, become the first line of defense for the state to supervise listed companies. Certified public accountants audit the legitimacy and fairness of accounting statements of listed companies and the inertia of accounting treatment methods to express audit opinions. Only by improving the practice quality of certified public accountants can we ensure the objectivity and authenticity of accounting information of listed companies, protect the legitimate rights and interests of investors and maintain the order of market economy. Matters needing attention in auditing accounting statements of state-owned enterprises, foreign-funded enterprises and listed companies: 1. Whether the audited assets are true and legal, and whether there are false assets; 2. Check whether the assets are consistent with the actual accounts and whether there are off-balance-sheet assets; 3, whether the audit assets are valid, whether there is only book value and no actual value; 4. Whether the creditor's rights in the assets are confirmed and whether there are bad debts; 5. Whether the asset structure is reasonable and whether there are virtual assets; 6. Analysis of asset changes shows that there are no non-performing assets; 7. Whether the liabilities are true and legal, and whether there is any concealment of liabilities; 8. Whether the debts in the liabilities are confirmed; 9. Whether the process in debt is legal and whether there is illegal borrowing of cash; 10. Whether the debt structure is reasonable and whether there are overdue debts; 1 1, owner's equity status, and analyze the increase and decrease of owner's equity; 12, whether the income is true, whether there is any false increase or decrease; 13. Have all the income been recorded? Small vault? ; 14, whether the income formation is legal and whether there is illegal income; 15, whether the cost is real and whether there is inflated or inflated; 16. Whether the fees are collected according to the facts and whether they are in compliance; 17, whether the revenue and expenditure match; 18, whether the formation of profits is true or not, and whether there is any behavior of artificially adjusting profits; 19, whether the non-operating income and expenditure are true and compliant; 20. Whether the profit distribution is compliant.
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