There are two accounting methods for long-term equity investment: cost method and equity method. According to the cost method, the investing enterprise and the invested entity are two independent legal entities and accounting entities. Investment enterprises will only carry out corresponding accounting treatment when they have economic business with the investee on the condition of increasing or decreasing the original assets, or realize the right to claim the after-tax profits or cash dividends of the investee. The holding income of the relevant investment is the profit or dividend actually received or determined to be received. If the initial investment cost is greater than the fair value share of the identifiable net assets of the investee when the investment is acquired, the difference is essentially the goodwill corresponding to the acquired equity share and the asset value of the investee that does not meet the recognition conditions. When the long-term equity investment is accounted as a single asset in the individual financial statements of investors, the goodwill is not reflected separately. When the initial investment cost is greater than the fair value share of the identifiable net assets of the investee, there is no need to adjust the long-term equity investment cost. If the initial investment cost is less than the fair value share of the identifiable net assets of the investee when the investment is acquired, the difference between the two is reflected in the concession of the transferor in the transaction pricing process, and this part of the inflow of economic benefits should be treated as income, included in the non-operating income in the current period when the investment is acquired, and the book value of long-term equity investment should be adjusted and increased. After an investment enterprise obtains a long-term equity investment, it shall adjust the book value of the long-term equity investment according to the share of the net profit or net loss realized by the invested entity and confirm it as the current investment profit and loss.

Legal basis: The Company Law is the main legal basis for the establishment and operation of private equity funds, and the Securities Law regulates the exit channels of private equity investment. In 2005, the Company Law and the Securities Law were revised simultaneously. Article 79 of the revised Company Law stipulates that a joint stock limited company can be established with less than 200 promoters, which greatly reduces the standards for establishing limited liability companies and joint stock limited companies. Requirements for reducing the proportion of industrial property rights and non-patented technology investment; Make new provisions on installment payment of registered capital and cancel the general restrictions on the company's foreign investment. The revised Securities Law reduces the capital scale requirements for listed companies, and has no rigid requirements for profitability.