This paper summarizes the temporary differences involved in long-term equity investment under the equity method, and combs and analyzes the difficulties of income tax accounting treatment with examples.
Keywords: long-term equity investment; Temporary differences; accounting treatment
The long-term equity investment accounted by the equity method refers to the investment that has the same constraints on the investee or has a significant impact on the investee, generally the investment in joint ventures and associated enterprises.
The book value determined according to the accounting standards at the time of initial recognition is basically recognized by the tax law, that is, its book value is generally equal to the tax basis at the time of acquisition. However, in the holding process, the book value will change with the change of the total owner's equity of the invested unit, while the tax basis determined according to the tax law will generally not change before the transfer or disposal of the investment assets, resulting in the inconsistency between the book value of long-term equity investment and its tax basis, resulting in temporary differences.
Whether to confirm the relevant income tax impact of temporary differences and whether to consider the holding intention of investment is a difficult point in accounting practice. This paper will sort out and analyze this difficulty.
I. Temporary differences of long-term equity investment under the equity method
1. Temporary differences involved in initial investment cost adjustment
Accounting standards stipulate that the initial investment cost of long-term equity investment accounted by the equity method should be compared with the fair value share of the identifiable net assets of the investee at the time of acquisition. If the initial investment cost is greater than the fair value share of the identifiable net assets of the investee, the long-term equity investment cost does not need to be adjusted. If the initial investment cost is less than the fair value share of the identifiable net assets of the investee, the book value of the long-term equity investment shall be adjusted according to the difference, and the difference shall be included in the current investment profit and loss.
According to the provisions of the tax law, no matter whether the initial investment cost is greater than or less than the fair value share of the identifiable net assets of the investee, the initial investment cost of long-term equity investment does not need to be adjusted after being determined, and the original acquisition cost of tax basis remains unchanged.
Therefore, when adjusting the initial investment cost, the book value of long-term equity investment is greater than that of tax basis, resulting in taxable temporary differences.
2. Temporary differences when the investee obtains the net profit.
According to the accounting standards, when the net profit realized by the investee causes the owner's equity to change during the investment period, the investing enterprise shall calculate its share according to the shareholding ratio, increase the book value of the long-term equity investment and recognize it as the current investment income.
The tax law stipulates that dividends, bonuses and other equity investment income should be realized according to the date when the invested unit makes the profit distribution decision. At the same time, it is also stipulated that dividends, bonuses and other equity investment income between eligible resident enterprises are tax-free income, that is to say, cash dividends or profits shared by investment enterprises from invested units are tax-free, and the original acquisition cost of long-term equity investment in tax basis remains unchanged.
Therefore, the book value of long-term equity investment is greater than the tax basis when the investee obtains net profit, resulting in taxable temporary differences.
3. Temporary differences involved when the investee has a net loss.
If the long-term equity investment is accounted for by the equity method according to the accounting standards, when the investee has a net loss, the investing enterprise shall reduce the book value of the long-term equity investment according to its share, and at the same time confirm the investment loss.
However, according to the tax law, when the investee has a net loss, the original acquisition cost of long-term equity investment in tax basis remains unchanged, and the book value of long-term equity investment is less than that of tax basis, resulting in deductible temporary differences.
4. Temporary differences involved in changes in other rights and interests of the investee.
For the long-term equity investment accounted by the equity method in accordance with accounting standards, and for the changes in the owner's equity of the investee other than the net profit and loss, the investing enterprise shall calculate the change part belonging to the investing enterprise according to the shareholding ratio, adjust the book value of the long-term equity investment accordingly, and increase or decrease the capital reserve.
However, according to the provisions of the tax law, the tax basis will not change, so there will be taxable temporary differences or deductible temporary differences.
5. Temporary differences in impairment of long-term equity investment
If the long-term equity investment accounted for by the equity method according to the accounting standards shows signs of impairment, provision for impairment shall be made in accordance with the provisions of the asset impairment standards, and the book value of the long-term equity investment shall be reduced accordingly after provision for impairment.
According to the tax law, if the assets are impaired during the period when an enterprise holds various assets, the tax basis of the assets shall not be adjusted.
Therefore, the book value of long-term equity investment is less than that of tax basis, resulting in deductible temporary differences.
II. Accounting Treatment of Temporary Difference Income Tax
1. In case of preparing to hold long-term equity investment for a long time.
In the case of preparing to hold long-term equity investment for a long time, the temporary differences caused by initial investment cost adjustment, impairment of long-term equity investment and other equity changes of the invested unit are not expected to be reversed in the future, and there is no income tax impact on the future period; Confirm that temporary differences arising from investment gains and losses are tax-free when cash dividends or profits are returned in installments in future periods, and have no income tax impact on future periods; Therefore, in the case of long-term holding, the difference between the book value of long-term equity investment calculated by equity method and tax basis is generally not confirmed.
2. In preparation for the sale of long-term equity investment.
According to the provisions of the tax law, enterprises are allowed to deduct the cost of investment assets when transferring or disposing of them.
If the book value of the long-term equity investment is different from that of tax basis, the income tax shall be calculated according to the following circumstances:
(1) Income tax accounting treatment of taxable temporary differences
According to accounting standards, taxable temporary differences involved in long-term equity investments accounted by equity method should generally be recognized as related deferred income tax liabilities.
Example 1: Company A acquired 30% of the voting shares of Company B for 40 million yuan on 201year1October 5, which can exert significant influence on Company B. The long-term equity investment is accounted for by the equity method.
The total fair value of identifiable net assets of Company B at the time of investment is 65.438+0.50 billion yuan (assuming that the fair value of all identifiable assets and liabilities of Company B at the time of investment is the same as the book value).
In 20 1 1 year, company b realized a net profit of 30 million yuan, which was included in the capital reserve of 2 million yuan due to the increase in the fair value of available-for-sale financial assets.
Both Company A and Company B are resident enterprises, and the applicable income tax rate is 25%. The accounting policies and accounting periods adopted by both parties are the same.
(1) Accounting treatment of investment obtained by Company A:
Borrow: long-term equity investment? Spend 40 million pounds
Loan: 40 million yuan in bank deposit.
Since the initial investment cost of this long-term equity investment (40 million yuan) is less than the fair value share of identifiable net assets of Company B (45 million yuan) calculated according to the shareholding ratio, its initial investment cost should be adjusted.
Borrow: long-term equity investment? Loan with a cost of 5 million: non-operating income of 5 million.
After adjustment, the book value of long-term equity investment is 45 million yuan, while the original acquisition cost of tax basis does not change to 40 million yuan, resulting in a taxable temporary difference of 5 million yuan, and the deferred income tax liability should be recognized as 6,543,800 yuan+0.25 million yuan.
Debit: income tax expense1250,000.
Credit: deferred income tax liabilities1250,000.
② Accounting treatment of 2011kloc-0/231:
Borrow: long-term equity investment? Profit and loss adjustment 9 million
? Other changes in equity 600 000
Loan: the investment income is 9 million.
Capital reserve? Other capital reserve of 600,000 yuan
On 20 1 1 and February 3 1, the book value of the long-term equity investment was adjusted to 54.6 million yuan, and tax basis kept the original acquisition cost unchanged to 40 million yuan, resulting in a taxable temporary difference of14.6 million yuan. The deferred income tax liability should be confirmed to be RMB 3.65 million, and the book value has been confirmed to be 65,438+.
Debit: income tax expense is 2.25 million.
Capital reserve? Other capital reserve 150 000
Loan: Deferred income tax liability is 2.4 million.
(2) Accounting treatment of income tax that can deduct temporary differences.
If the deductible temporary differences involved in the long-term equity investment accounted for by the equity method meet the following conditions, the relevant deferred income tax assets shall be recognized: First, the temporary differences are likely to be reversed in the foreseeable future; Second, it is likely to obtain taxable income for deducting deductible temporary differences in the future.
Example 2: Company A acquired 30% of the voting shares of Company B for 50 million yuan on October 2, 20 10, which can exert great influence on Company B. The long-term equity investment is accounted for by the equity method.
The total fair value of identifiable net assets of Company B at the time of investment is 65.438+0.50 billion yuan (assuming that the fair value of all identifiable assets and liabilities of Company B at the time of investment is the same as the book value).
In 20 10, the net loss of company b was 30 million yuan, and the financial situation of company b was still deteriorating. It is estimated that the recoverable amount of long-term equity investment is 35 million yuan.
Both Company A and Company B are resident enterprises, and the applicable income tax rate is 25%. The accounting policies and accounting periods adopted by both parties are the same.
(1) Accounting treatment of investment obtained by Company A:
Borrow: long-term equity investment? Spend 50 million
Loan: 50 million yuan in bank deposit.
Since the initial investment cost of this long-term equity investment (50 million yuan) is greater than the share of fair value of identifiable net assets of Company B (45 million yuan) according to the shareholding ratio, it is unnecessary to adjust the initial investment cost.
The book value of this long-term equity investment is consistent with that of tax basis, which is the original acquisition cost of 50 million yuan, and there is no temporary difference, so it is unnecessary to confirm the deferred income tax.
② Accounting treatment of 20101231:
Borrow: the investment income is 9 million.
Loan: long-term equity investment? Profit and loss adjustment 9 million
After the investment income is confirmed, the long-term equity investment balance is 4,654,380+0,000 yuan, the recoverable amount is 35 million yuan, and the book balance is greater than the recoverable amount of 6 million yuan, so the impairment reserve should be set aside for 6 million yuan.
Debit: Asset impairment loss of 6 million.
Loan: impairment reserve for long-term equity investment is 6,000,000.
After adjustment, the book value of the long-term equity investment on February 365,438+0, 2065 was 35 million yuan, while the original acquisition cost in tax basis was not changed to 50 million yuan, resulting in a deductible temporary difference of 654,380+05 million yuan. If Company A is likely to obtain taxable income in the future to offset the deductible temporary difference, it shall confirm the deferred income tax assets of 3.75 million yuan.
Debit: deferred income tax assets of 3,750,000.
Loan: income tax expense is 3.75 million yuan.
If Company A cannot obtain taxable income to deduct deductible temporary differences in the future, deferred income tax assets cannot be recognized.
(Author: Jiangsu Suya Jincheng Certified Public Accountants Co., Ltd.)
refer to
[1] Ministry of Finance, Accounting Standards for Enterprises 2006, Economic Science Press, 2006.
[2] Explanation of Accounting Standards for Business Enterprises of Ministry of Finance 20 10.
[3] China Institute of Certified Public Accountants, 20 13 Accounting, a national unified examination guidance textbook for certified public accountants, China Financial and Economic Publishing House.