Research On The Definition Of Consolidation Scope

Under the background of information expansion which the users of financial statements have increasingly strict requirement on financial information, the usefulness of consolidated financial statements has gotten wide attention and recognition. Taking "control" as the basis to reasonably determine the scope of consolidation is the premise to guarantee the quality of accounting information and to improve the usefulness of the consolidated financial statements.The relevant provisions of the scope in China’s accounting standards were revised for several times and the "control" concept has undergone several major changes. Especially the revision of ―CAS33-Consolidated financial statements‖ in 2014, on the basis of drawing lessons from IFRS10, the second chapter has made a significant revision on the "merger scope". The revision magnitude has been never ever so large. Judging from the implementation of the guidelines, it often occurs that the identification of the control is inconsistent, form distorts economic substance, the key information’s disclosure is not very clear and so on. In practice, the identification of "control" needs significant professional judgment, which is more flexible in the process of determining the scope of the merger. In the course of implementing the new standards, it is inevitable to encounter many controversial issues, challenging the accounting principle.The main part of the article first expounds the definition of the scope of the merger under the three main theoretical foundations, which include the parent company theory, the ownership theory and the entity theory. Then from two dimensions of time and area, it introduces the development of control theory and makes a more in-depth demonstration and analysis on the definition of ―control‖ in American accounting standards, International accounting standards and China’s accounting standards respectively, pointing out the shortcomings of China’s relevant accounting standards at present. On this basis, paper analyses the deficiencies of the guidelines in detail through the selected SAIC and GM China 1% of equity trading case, Demei chemical case and Huarong leasing SPV and Yanzhou Coal Mining SPVcase. In the end, a proposal is put forward to improve the accounting standards on the scope of the merger. The paper uses the method of combining theory with practice to find problem and solve problem, having a very good practical significance.