what is equity securities

equity securities refer to securities that represent the owners' rights and interests of the issuing enterprise, such as common stock issued by a joint stock limited company. Equity securities are a basic financial tool and the main source of financing for enterprises. Investors holding equity securities of an enterprise represent owners' equity in the enterprise, and common stock and preferred stock are common equity securities.

definition

securities regulated by the securities law are divided into two categories -

1. Equity

securities: holding such securities means that you have the property ownership of the subject matter of the securities. For example, if you buy shares of China Merchants Bank, it means that you hold a share interest in all the properties of China Merchants Bank. Another example is that if you hold a fund, it means that you hold a share of all the assets of the fund. What we are talking about here is the share-holding rights, that is, with other shareholders or fund beneficiaries, we respectively * * * own (in short, we don't share * * *) all the property of the joint stock limited company or the fund.

2. Debt

securities: Holding such securities means that you have creditor's rights to the securities issuer. The issuer is your debtor. For example, if you buy government bonds, it means that you have the creditor's rights to the country. If you buy a certificate of deposit issued by a bank, it also means that you have a debt claim against the bank.

The so-called stocks belong to equity securities, while bonds (excluding corporate bonds convertible into stocks), futures, options and swap contracts belong to debt securities.

deduction of issuance expenses

the handling fee for issuing equity securities shall not be deducted before tax

The notice of the Ministry of Finance makes it clear that the handling fees and commissions paid by enterprises to relevant securities underwriting institutions for issuing equity securities shall not be deducted before tax.

according to the relevant regulations of the Ministry of finance, the fees and commissions incurred by enterprises related to production and operation are allowed to be deducted before tax if they do not exceed the limit; The excess shall not be deducted.

among them, the property insurance enterprise shall calculate the limit according to 15% of the balance of all premium income in the current year after deducting surrender premium; The life insurance enterprise shall calculate the limit according to 1% of the balance after deducting the surrender premium from the total premium income in the current year. Other enterprises shall calculate the limit according to 5% of the income confirmed by the service agreement or contract signed with intermediary service institutions or individuals with legal business qualifications.

the Ministry of finance requires that enterprises should sign agency agreements or contracts with intermediary service enterprises or individuals with legal business qualifications, and pay handling fees and commissions according to relevant state regulations. Except for entrusting an individual agent, the handling fees and commissions paid by enterprises in cash and other non-transfer ways shall not be deducted before tax.

the Ministry of finance has also made it clear that enterprises are not allowed to include fees and commission expenses in kickbacks, business commissions, rebates, entrance fees and other expenses. Fees and commission expenses that an enterprise has included in fixed assets, intangible assets and other related assets shall be deducted by installments through depreciation and amortization, and shall not be deducted directly in the current period. The fees and commissions paid by the enterprise shall not directly offset the amount of the service agreement or contract, and shall be recorded truthfully.

[Editor ]

Sino-US accounting treatment

I. Accounting treatment of equity securities investment in the United States

American accounting standards stipulate that companies should make decisions according to the following procedures when investing in securities, so as to determine the accounting method used for investment (assuming that Company A buys shares of Company B): First, does Company A buy securities of Company B to have a significant impact on it? If so, the equity method is used for accounting; If not, consider whether this security has a fair value that can be easily determined? Second, if there is no definite fair value, the cost method is used for accounting; If there is a certain fair value, can the purchased securities be divided into marketable securities and transactional securities? Third, if it can be divided, the fair value method is adopted; If it cannot be classified, it is necessary to reclassify the securities and adopt fair value accounting. Explain the accounting methods used in the above investment decision with examples:

Example: Company A bought 1, common shares of Company B with cash of 5, yuan on January 5, 22, and each share was 5 yuan, accounting for 2% of the total shares of Company B. Company B had net assets of 2 million yuan at the beginning of 22, net income of 4, yuan in 22, and paid cash dividend of 6, yuan on December 31, 22. From 22 to 23, the accumulated net income was 1.5 million yuan.

1. Fair value method

(1) If Company A classifies the stock purchased by Company B as trading securities, the fair value method will be used. Generally speaking, the premise for securities to be classified as trading securities is that they have fair values that can be easily determined. Therefore, it is assumed that the market prices of Company B's shares on December 31, 22 and December 31, 23 are 8 yuan and 6 yuan per share respectively. On January 2, 24, the securities were sold and 6, yuan was received in cash. The accounting treatment is as follows:

① On January 5, 22, when the investment is obtained, it is debited: ordinary stock investment-Company B 5,, and credited: cash 5,.

② On December 31, 22, when the dividend is received, it is debited: cash 12,, and credited: dividend income 12,. < p Accounting treatment: debit: ordinary stock investment-Company B 3,, credit: unrealized holding gain of 3,. < P > ④ The change of fair value was recorded on December 31, 22, and the change amount of fair value was 1,× (8-6) = 2, yuan. Debit: unrealized holding loss of 2, yuan, and credit: ordinary stock investment-Company B of 2, yuan.

The unrealized holding gain or loss account at the end of each period is a dummy account, and its balance is reflected in the income statement.

⑤ When selling securities on January 2, 24: Debit: 6, yuan in cash, Credit: 5, yuan in ordinary stock investment, Credit: 1, yuan in realized profit from securities sales.

(2) If Company A classifies the stock purchased from Company B as marketable securities, the accounting entries of Company A when using the fair value method

are the same.

⑥ Record the change of fair value on December 31, 22, debit: ordinary stock investment-Company B 3,, credit: unrealized holding gain/loss of 3,.

⑥ Record the change of fair value on December 31, 23, debit: unrealized holding loss/loss of 2,, credit: ordinary stock investment-

⑧ When selling securities on January 2th, 23, debit: 6, yuan in cash, debit: 1, yuan in unrealized gains/losses, credit: 5, yuan in common stock investment-Company B, and credit: 2, yuan in realized gains from securities sales.

(3) If American companies do not classify the securities after purchasing them. If the securities of the trading bank are converted into available-for-sale securities, the unrealized holding gains/losses confirmed in the income statement will not be adjusted, but the name of the account will be changed when the fair value of the annual securities changes.

⑨ When the change of fair value in the current year is recorded, the unrealized holding loss/loss of RMB 2, will be debited, and the ordinary stock investment of RMB 2, will be credited.

⑩ If the available-for-sale securities are classified as trading securities, the unrealized holding gains/losses recorded in other comprehensive income should be transferred to the profit and loss statement through the following entries in the change year, and recorded fairly. Debit: unrealized holding loss/loss is 3, yuan, and credit: realized gain from reclassification of equity securities is 3, yuan. < P > 2. If American companies use the cost method, the accounting for investment is as follows: < P > On January 5, 22, the accounting entries for investment are the same as those on December 31, 22. When dividends are obtained, Because the net income of Company B in 21 was 4, yuan less than the dividend paid of 6, yuan, the dividend income that Company A should confirm was 4,× 2% = 8, yuan, debited: 12, yuan in cash, credited: 8, yuan in dividend income, and credited: 4, yuan in common stock investment-Company B. < P > In 23, Company B.

3. If the American company chooses the equity method, the following investment accounting will be carried out:

The accounting entries when the investment is obtained on January 5, 22 are the same as those when the investment income is realized on December 31, 22. Debit: ordinary stock investment-Company B 8, and credit: investment income 8.

It was obtained on December 31, 22. Credit: ordinary stock investment-Company B is 12,.

At the end of the period, since the cost of obtaining investment is higher than its share in the net assets of Company B, the difference (5,-2 million× 2% = 1,) should be allocated to assets and goodwill. Assuming that 8, yuan is allocated to unrecorded goodwill, the amortization period is 2 years; 2, yuan is allocated to undervalued fixed assets, with amortization period of 5 years. The accounting entries are: debit: investment income of 8, yuan, and credit: ordinary stock investment of 8, yuan in Company B. < P > The investment income should be confirmed as (1,5,-4,) × 2% = 22, on December 31, 23. Credit: investment income is 22,.

II. Accounting treatment of equity securities investment by listed companies in China

Listed companies in China choose investment accounting methods for purchased equity securities according to the following investment decisions: First, does the investment equity securities serve as the storage form of surplus funds, not for the purpose of controlling the invested units? If yes, it is accounted for as a short-term investment, priced at cost when it is acquired, and priced at the end of the period according to the lower of cost and market price; If not, consider whether the investment is to control, * * * control or have a significant impact on the invested unit? Second, if it is for the purpose of control, co-control or significant influence, the equity method is adopted; If it is not for control, co-control or significant influence, the cost method will be used for accounting.

1. When the purchased securities are used as short-term investments, the initial value is priced at cost, and the short-term investments are priced at the lower of cost and market price at the end of each period.

Comparison of accounting treatment of equity securities investment between China and the United States

① When the investment was obtained on January 5, 22, it was debited with 5, short-term investment and credited with 5, cash.

② When the dividend was received on December 31, 21, it was debited with 12, cash and credited with 12, short-term investment.

on December 31, 23, the cost (5 yuan per share) was lower than the market price (6 yuan per share), excluding short-term investment depreciation reserve.

③ When disposing of this investment in 24, debit: 6, yuan in cash, credit: 38, yuan in short-term investment, and credit: 22, yuan in investment income.

2. If the cost method is selected, the following accounting will be carried out:

When the investment is acquired on January 5, 22, it will be credited by: long-term equity investment-5, yuan from Company B. Because the net income of Company B in 22 was less than the dividend paid of 6, yuan, the investment income that Company A should confirm was 4,× 2% = 8, yuan, and the dividend received was less than the difference of the confirmed investment income (12,-8, = 4,) to offset the initial investment cost of Company A.. Accounting treatment: debit: cash 12,, credit: investment income 8,, credit: long-term equity investment-Company B 4,. < P > 3. If the equity method is selected, the accounting treatment of long-term equity investment is as follows: < P > ① Debit when the investment is acquired on January 5, 22: long-term equity investment-Company B (investment cost) 5,. Credit: cash 5,.

② When recording the equity investment difference on January 5, 22, debit: long-term equity investment-Company B (equity investment difference) 1,, and credit: long-term equity investment-Company B (investment cost) 1,.

③ The investment income realized on December 31, 22, Debit: long-term equity investment-Company B (adjusted by profit and loss) 8, Credit: investment income 8,. < P > ④ On December 31, 22, the equity investment difference was amortized for 1 years, with an annual amortization of 1,/1 = 1, yuan. Debit: investment income-equity investment difference was amortized for 1, yuan. Credit: long-term equity investment-Company B (equity investment difference) is 1,. < P > ⑤ On December 31, 23, the investment income should be confirmed as (1,5, yuan-< P > 4, yuan) × 2% = 22,, and the accounting treatment is: debit: long-term equity investment-Company B 22,. Credit: investment income is 22,.

III. Similarities and differences in accounting treatment of equity securities between China and the United States

From the analysis of the above examples, we can draw the conclusion that the United States and China use the cost method and the equity method for accounting treatment of investments obtained in cash, and the accounting treatment of mutual conversion between the cost method and the equity method is the same. Compare the differences of investment in equity securities between the two countries as follows:

1. The United States and China have different classifications of equity investment. China divides common stock investment into short-term investment and long-term equity investment. Short-term investment is priced at cost when it is acquired, and the lower of cost and market price method is adopted at the end of the period. If there is control, joint control or significant influence on the invested entity, the long-term equity investment shall be accounted by the equity method; If there is no control, co-control and significant influence on the invested entity, the long-term equity investment shall be accounted by the cost method. The United States does not classify long-term and short-term investments, but divides equity securities into trading securities and marketable securities. If there is a significant impact on the invested entity, the equity method shall be adopted; If there is no significant impact and it is difficult to determine the fair value of the purchased securities, the cost method is adopted; If there is no significant impact and the fair value is easy to determine, the fair value method is adopted.

2. Equity investment is presented differently in accounting statements. In China, short-term investment is listed in the current assets of the balance sheet, and the loss of short-term investment is listed in the income statement; Long-term equity investment is listed in long-term investment. In the United States, the current assets with tradable securities listed in the balance sheet, unrealized holding gains or losses are listed in the income statement; If the securities available for sale are expected to be available in one year or more