A Study On The Accounting Method Of Corporate Division

The retrenchment strategy of company starts early in the west, and it begins in 1960s and 1970s. This is an application of dialectical thought into the operation and management of company. It perfectly solves the problems of mixed business, failure to recognize the main business, and low efficiency, which are caused by blind expansion of the enterprise. Among them, "division" is the main means of the retrenchment strategy. Its aim is to help the enterprise solve the problem of "being huge but miscellaneous" and follow the road of "being refined and specialized". In this way, the company can use all its resource to develop the advanced business, which means the improvement of competitive strength, the optimization of the structure of the company and the increasing of the enterprise value.In foreign countries, this strategy is applied widely and has become a mature method of capital operation. In contrast, the development of the method of "division" is very immature. This immaturity displays itself not only in the fact that little academic literature in this area can be found, but also in the situation that there is actually no application of "division" in the practice circle. On 10th March, 2010, ST Dong Bei Gao(600003) was listed in division. This is the first case of complete asset being listed division. Till then, the corporate division starts in China. Although the division can be carried out based on either book value or fair value according to the domestic law, clear rules about corporate division are not made in today's Enterprise Accounting Standard. The situation that no specific law can be referred to goes against the proper application of division strategy in China's capital market. Therefore, standard and reasonable accounting method is needed in practice, and it is of vital importance to decide how to choose between book value and fair value to standardize actual application of division.This thesis, which studies the accounting method of division, will start from the idea that division is the reversal of mergence, analyze the character and motivation of them two, make different kinds of division and mergence correspond and deduce the accounting principle and method of division from the accounting method of mergence.This article is divided into seven parts:In the first tow parts, this thesis will introduce the background, article framework, research means and literature review both at home and abroad of the corporate division.In the third part, a summary of corporate division and enterprise mergence will be made. After the introduction of definition, type, and inner meaning of division and mergence, a comparison of these two will be made through their theory basis, motivation, and operation process. Thus the inner connection of division and mergence can be found and the idea that the division is the reversal of mergence can be proved. The correspondence of division and mergence can be set up to found the basis of deduction from the accounting method of mergence to that of division.Fourthly, this thesis will study the division accounting method. This thesis will induct the division accounting method from the reversal thought of mergence and compare them two.Fifth, the case of Dong Bei division will be introduced.Sixth, According to the nature and the actual plan of division, during the process of division, free conversion of state-owned shares is carried out with no cash flow created and shareholders are still interrelated after division. Therefore, although it is divided with a change of stock, the measurement basis is not changed in the rapid division of Dong Bei and the using of book value is reasonable. By the way, the reason why it is reasonable will be offered.At last, this thesis will discuss how to choose the division accounting method and introduce the application of division in our country. The problems that came out when using the method of division will also be mentioned and some possible solutions will also be offered. In this section, the choice of corporate division method will be firstly defined. From the idea that division is the reverse of mergence, the correct accounting method shall be chosen based on the following factors:whether 111the control is changed, whether the cash flow is created, and whether shareholders are still interrelated after division. The application of division in our country will be secondly analyzed. This means that the problems of the application of division and the accounting method in division will be analyzed. Finally, solutions to the existing problems will be offered in hope of proper use of division in China in the future.Normative-research will be mainly used in this thesis, which is conducted in a back stepping way. While the methods of comparison, summarization and induction are used to carry out the argumentation, the practical case of the division of Dong Bei Highway will also be introduced. It is expected that this thesis will help the method of division follow a healthy developing road.