Study On The Economic Consequences By Choosing Accounting Methods In Chinese Business Combination

TSINGHUA TONGFANG and LUYING Electronic Company's declaring business combination by stock exchange starts the prelude of business combination by stock exchange of the listed companies in China in October.1998. After that, nine listed companies such as XINCHAO Industry, HUAGUANG China Company, Double Stars, etc declared business combination by stock exchange with other nine unlisted companies in succession. In January, 2004, TCL Group made use of identification as parent company to merger its subsidiary, thus achieved its repurchase &recombination IPO (Initial Public Offerings) .These business combinations by stock exchange all make use of the pooling of interests method, which represents their accordant fancy to this method. The International Accounting Standards Board's negative attitude to this method and the Chinese listed companies'unanimous preference to it as well as China Securities Regulatory Commission's attitude of acquiescence beyond system to it forms a sharp contrast. Therefore constructing a business combination accounting system which meets Chinese practice and setting a high quality business combination accounting rule basing on it to regulate and instruct practical business management are important topics in combination accounting.This paper makes the general and specific economic consequences analysis of business combinations by stock exchange which use the pooling of interests method, then points out that the pooling of interests method's proper limitation leading to its abolishment on international is unavoidable base on the analysis as well as the environment of Chinese current stock market. However, because of the condition to use purchase method currently in China is not mature, it is impossible to abolish the pooling of interests method in China nowadays. This paper suggests that what China should choose is a kind of binary structures that allowing purchase method and the pooling of...