Because the owner's equity of the subsidiary and the long-term equity investment of the parent company are internal transactions and need to be offset, only the long-term equity investment under the equity method is equal to the owner's equity of the subsidiary can be offset. The cost method only confirms the long-term investment according to the dividends received, which does not mean that it enjoys the owner's rights and interests of subsidiaries and cannot be completely offset.
According to the requirements of the Accounting Standards for Business Enterprises, if an investment enterprise controls the invested enterprise, it needs to use the cost method as the accounting treatment of daily individual statements. At the end of the period, the long-term equity investment needs to be included in the consolidated statement according to the equity method and adjusted retrospectively.
The same control is the combination of rights and interests, and the different control is the purchase method. The difference is that the final adjustment of entries needs the same control to restore retained earnings in order to "integrate survival".
Consolidation of accounting statements: refers to the statements prepared by the parent company, including the relevant data of accounting statements of all holding subsidiaries. This report can provide users with the financial status and operating results of the company group.
That is to say, it is based on the accounting entity composed of the parent company and its subsidiaries, and the individual financial statements compiled by the holding company and its subsidiaries, which reflect the consolidated financial position and operating results after offsetting the current accounts within the group. Consolidated statements include consolidated balance sheet, consolidated income statement, consolidated cash flow statement or consolidated statement of changes in financial position, etc.