The theory of parent company is based on the principle of importance, and it is assumed that any report can not meet all the requirements of all users, but only the main needs of its main stakeholders. According to the parent company theory, as long as the main requirements of the shareholders of the parent company for accounting information are met, the basic requirements of other stakeholders (including minority shareholders) for accounting information will generally be met.
Main features of parent company theory:
1. purpose and user of consolidated report
According to the parent company theory, for the benefit of the owner of the parent company, the consolidated statement should be compiled according to the opinions of the shareholders of the parent company, and the consolidated statement is an extension of the accounting statements of the parent company. The main users of consolidated statements are shareholders and creditors of the parent company.
2. Comprehensive net income
The consolidated net income is the net income of the owner of the parent company, and the net income of minority shareholders in the subsidiary company should be excluded.
3, minority equity income
From the perspective of the shareholders of the parent company, the income of minority equity is an expense, which is measured by multiplying the net book income of subsidiaries by the proportion of minority equity. The income of minority equity is regarded as an expense that does not meet the definition of expense elements. At present, in accounting practice, the income of minority equity is determined as the deduction of consolidated net income.
4. Minority shareholders' rights and interests
Minority shareholders' equity is a liability from the perspective of the shareholders of the parent company, and its measurement is to multiply the total amount in the subsidiary's balance sheet by the proportion of minority shareholders. Taking minority shareholders' rights and interests as liabilities does not conform to the definition of liability elements. In practice, minority shareholders' equity is listed separately between liabilities and owners' equity.
5. Consolidation of net assets of subsidiaries
Among the net assets of subsidiaries, the part occupied by the parent company is merged according to the price paid by the parent company for its rights and interests, and the part occupied by minority shares is merged according to the book value.
6. Unrealized gains and losses
If the parent company is sold to a subsidiary company, the unrealized gains and losses between companies shall be fully offset from the consolidated net income; In the case that the subsidiary sells to the parent company, it only offsets the share enjoyed by the parent company. In practice, reverse sales also eliminated the unrealized gains and losses in the morning, and only distributed them between minority shares and majority shares. This treatment makes the combined net profit and loss consistent with that of the parent company.
7. Treatment of presumed profits and losses
Intra-group-if an enterprise buys bonds issued by other enterprises, if the price paid by the purchasing enterprise is greater than the book value of bonds payable (the face value of bonds plus unamortized premium or minus unamortized discount), presumed losses will occur. On the contrary, there is an assumption of income. According to the parent company theory, when the parent company bonds are presumed to be redeemed, they should all be included in the consolidated net income; However, under the assumption that the bonds of subsidiaries are redeemed, only the share enjoyed by the parent company is confirmed. In practice, whether it is a parent company bond or a subsidiary company bond, whether it is supposed to be redeemed or not, it should be recognized in the income or expense account. However, under the assumption of redemption of subsidiary bonds, it should be distributed between majority equity and minority dividends, which is similar to the treatment of unrealized gains and losses between companies in practice.
8. Selection of foreign currency statement conversion method
Under the parent company theory, the time method of holding the parent company's currency in the conversion of foreign currency statements is consistent with the preparation method of consolidated accounting statements based on the parent company theory.