According to the current accounting standards, the holding subsidiaries (holding more than 40% of shares) are accounted by the cost method, so the long-term investment of the parent company is not equal to the product of the subsidiary's net capital and the shareholding ratio, because the net capital reflected in the parent company's statements is not equal to the "attributable to the owner's equity of the parent company" in the consolidated statements.
According to the relevant provisions of the Accounting Standards System for Business Enterprises (2006), "net profit attributable to owners of parent companies" is reflected in the consolidated net profit of enterprises and belongs to shareholders (owners) of parent companies.
Extended data;
First, the parent company theory.
According to the parent company theory, the shareholders in the enterprise group only include the shareholders of the parent company, excluding the minority shareholders of the subsidiaries, and are regarded as the external creditors of the main body of the company group. Shareholders' equity in the consolidated balance sheet prepared by this accounting entity and net profit in the consolidated income statement only refer to the part owned and obtained by the parent company, and the consolidated accounting statement is regarded as the extension and expansion of the accounting statement of the parent company.
Second, the theory of substance.
Entity theory holds that all shareholders in an enterprise group are treated equally, and both major shareholders and minor shareholders are shareholders in the group, without overemphasizing the rights and interests of shareholders in the holding company. The consolidated accounting statements compiled by this theory can meet the management needs of the whole production and operation activities in the enterprise group.
Third, contemporary theory is actually a mixture of parent company theory and entity theory. American GAAP adopts contemporary theory, so it is widely used in American practice.
Because the contemporary theory absorbs part of the parent company theory and the entity theory, it lacks internal consistency. Although the contradiction in the application of accounting concepts in the parent company theory is avoided, there is still a problem of inconsistent pricing in the valuation of consolidated net assets.
Baidu Encyclopedia-Comprehensive Report