The Research on Accounting for Income Tax of Mergers and Acquisitions 国际会计专业毕业论文 英文.doc
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1、The Research on Accounting for Income Tax of Mergers and AcquisitionsAbstractM&A stand for mergers and acquisitions. Mergers refer to the situation that the assets and liabilities of one company are transferred to the other company and the first company is dissolved. However, for acquisitions, both
2、companies keep their legal status and one company acquires the control of the other company. With the development of the society, the transactions between companies become frequent and the scale of economy gets larger. Moreover, we find M&A become very common in international world. China, as a larg
3、e developing country of WTO, also has an increasing number of transactions about M&A in the past few years. In fact, large companies all around the world have seen a variety of benefits for the development of the enterprises brought by M&A. And at the same time the whole society is benefited from M&
4、A due to the efficient allocation of resources. However, the rules and standards about M&A are not very mature since M&A are relatively new rising transactions and very complicated. Fortunately, the issuance of “The notification of the income tax problem of the business combination and division tran
5、sactions by the State Administration of Taxation” (No.1192000of State Administration of Taxation ) make up the blank of tax law. But we are still challenged by accounting for income tax of M&A because of the differences between accounting standards and rules of tax law. In order to gain more knowled
6、ge about the problem, the essay first introduces the general methods of accounting for income tax. Then the paper discusses the relevant rules of tax law and accounting standards for M&A. Last but not least, the thesis talks about the accounting treatment under different types of business combinatio
7、n so as to throw light on the problem.【Key Words】income tax, M&A, business combination, balance sheet liability method, deductible or taxable temporary differences, deferred tax assets or liabilitiesTable of Contents普通本科生毕业论文(设计)诚信承诺书iAbstractiiAcknowledgementsiiiTable of Contentsiv1. Introduction12
8、. General methods of accounting for income tax22.1 Income statement liability vs. balance sheet liability method22.1.1 Income statement liability method22.1.2 Balance sheet liability method32.2 The adoption of balance sheet liability method42.2.1 The strengths of balance sheet liability method42.2.2
9、 The application of balance sheet liability method63 Rules of tax law and accounting standards for M&A73.1 Taxable and tax-free M&A73.2 Accounting standards for M&A83.2.1 Business combination under common control83.2.2 Business combination under no common control103.2.3Comparison of two types of bus
10、iness combination124 Accounting treatment for income tax of M&A144.1 Mergers under common control144.2 Acquisitions under common control164.3 Mergers under no common control184.4 Acquisitions under no common control195. Conclusion and summary20References22221. IntroductionM&A comprises of mergers an
11、d acquisitions, is sometimes also known as business combination. Merger refers to the portfolio of one or two more companies and only one company maintains the original legal status while the legal status of the other companies will no longer exist. In fact, most activities of M&A can be included in
12、 Mergers. Acquisition means that a company with cash, bonds or stocks buys all or part of shares or assets of another company in order to get control of the company. All the companies involved in the behavior of acquisition remain their legal status. Although M&A started relatively late in China, th
13、e past five years have seen sharp increase in the trade volume of M&A , which makes China become active in the M&A of all the Asia-Pacific countries. After becoming a member of WTO, the development of M&A in China is getting more mature and rational. M&A has undergone major changes in the pattern an
14、d aims周兴挺,中国企业并购发展研究,特区经济,2007. The early patterns of M&A were primarily passive and the main goal of M&A was to eliminate inferior companies. We can easily find that active pattern of M&A is growing at a rapid rate in the recent years and the prime target is to initiatively seek business expansion.
15、 Many great benefits brought by M&A result in the growing number of M&A杜文昌,企业兼并中的财务会计问题,科技资讯,2006. Actually, the behavior of M&A between companies not only enhances the development of the companies but also contributes to the progress of the society. For the company, they can acquire assets at lower
16、 prices and get important factors of production. Moreover, they can achieve a higher market share by expanding the scale of the company. In addition, they are able to reduce business risk by realizing diversification. For the whole society, M&A can promote the rational flow of social resources and o
17、ptimize the allocation of resources so that they can be used effectively. Furthermore, it can improve the development of economy by adjusting the structures of economy and industry. Additionally, M&A can avoid violent social unrest since the unrest caused by mergers is far lower than bankruptcies. H
18、owever, due to the complication of M&A and the imperfection of the relevant rules and standards, we find ourselves really puzzled in dealing with the accounting problems related to M&A. With the rapid increase in the development of M&A, the establishment of new rules and standards are essential to s
19、olve the emerging problems relevant to M&A. Among all the problems, how to deal with the income tax stands out. In June 2000, the State Administration of Taxation issued a file named “The notification of the income tax problem of the business combination and division transactions by the State Admini
20、stration of Taxation” (No.1192000of State Administration of Taxation ). To some extent, the file filled in the blank of tax law and keep in line with the international rules of treatment on the income tax of M&A. However, due to the differences between the tax law and the new “Enterprise Accounting
21、Standards” on the initial measurement of the combination cost, direct relevant expenses and subsequent measurement, we feel challenged in recognition and measurement of accounting as to this issue. Its meaningful to obtain a better understanding in order to help us know how to handle the accounting
22、problems about income tax resulted from M&A. 2. General methods of accounting for income tax2.1 Income statement liability vs. balance sheet liability method2.1.1 Income statement liability methodIncome statement liability method is the analysis of different timing of recognition for revenues and ex
23、penses due to the differences between accounting standards and tax law, that the analysis of timing differences. Timing differences are differences between taxable profit and accounting profit that originate in one period and reverse in one or more subsequent periods. Accounting profit is net profit
24、 or loss for a period before deducting tax expense. Taxable profit is the profit for a period, determined in accordance with the rules established by the taxation authorities, upon which income taxes are payable. Timing differences analyze the differences between taxable profit and accounting profit
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