Long-term equity investment refers to the equity investment controlled by the investment enterprise and having a significant impact on the invested entity, as well as the equity investment in its joint venture. In addition, other equity investments are not accounted for as long-term equity investments.
process
Long-term equity investment refers to obtaining the shares of the invested unit through investment. An enterprise's equity investment in other units is usually held for a long time, with the purpose of controlling the invested unit through equity investment, or exerting significant influence on the invested unit, or establishing close relationship with the invested unit, so as to spread business risks. Equity investment usually has the characteristics of large investment, long investment cycle, high risk and great benefits to enterprises.
The impact of long-term equity investment on the investee can be divided into the following three types:
(1) Control right refers to the right to decide the financial and business policies of an enterprise, and thus obtain benefits from the business activities of the enterprise. The investee is a subsidiary of the enterprise. (2)*** has control, refers to the control of an economic activity according to the contract. The invested entity is a joint venture of this enterprise. (3) Significant influence refers to having the right to participate in the decision-making of enterprise financial and operating policies, but not to decide these policies. The investee is an affiliated enterprise of this enterprise. Note: Under the original standards, there is no control, no * * * control and significant influence, and there is no quotation in the active market, so the fair value cannot be measured reliably. Confirmed as a long-term equity investment. Under the latest standards, this part of the investment is recognized as financial assets, which are available-for-sale financial assets measured at fair value, that is to say, even if the fair value cannot be measured reliably, valuation technology should be used to measure it.
final result
The change of long-term equity investment accounting has caused certain economic consequences to enterprises, and new risk points have appeared, which has caused new changes in earnings management, whitewashing financial statements and even fraud of listed companies, leading to an increase in the quality risk of accounting information, which not only increases the difficulty of enterprise risk control, but also puts forward new requirements for internal control. Therefore, actively establishing and perfecting the internal control system of long-term equity investment and implementing the necessary internal control self-evaluation can promote the management authorities to discover the internal control defects of equity investment, improve the internal control of the company and promote the realization of enterprise management objectives, which is of great significance to deepening the accounting theory and practice in China.