Research On The Consolidated Scope Of Structured Entity

The determination of the scope of consolidation in the consolidated financial statements has always been a difficult and important point in the field of accounting.And the problem of the structured entity is much more complicated because of its unique structure and special operation mode.For a long time,the structured entity was being excluded from the scope of consolidation since that it did not meet the traditional standard of "majority voting".However,there was huge risk hiding behind it which finally emerged in the global financial crisis,triggering a great deal of attention from market investors and regulators,and thus prompting accounting standard-setting bodies focus on the research of structured entities issues.With the convergence of China’s accounting standards and international standards,China promulgated the new "CAS 33-Consolidated Financial Statements" in 2014 and introduced a new concept of "control" with three elements of the definition,which embodies the principle of substantive control and is set to be the only criterion for determining the scope of the merger.And the new merger guideline and the new concept of "control" provides a theoretical basis on the research on the merge of the structured entity.The structure of the paper is as follows.Firstly,the paper analyzes the definition and the difference of Structured Entity,Special Purpose Entity and Variable Interest Entity,and also generalizes three levels of the principles of consolidated scope,namely,the standard of "majority stake","majority voting right" and "substantive control".And makes it clear through reasonable analysis that the "substantive control" standard has its rationality and applicability to the consolidated scope of all kinds of enterprises,especially for the Structured Entity.Secondly,the paper selects 22 sample banks which initiates a large proportion of the Structured Entities,analyzes the annual consolidated financial report and summarizes the policy and practice of accounting treatment about the consolidated scope of the Structured Entities.This section also includes analysis about typical Structured Entities,such as bank-sponsored financial products,asset securitization entities and so on.It is important to summarize the status quo of the merger scope of Structured Entities,mainly including the types of structured subjects which are included in the scope of consolidation and which are not and it is also critical to make sure about the judgment criteria companies are being used currently and then to judge it and try to find out the possible defects in the following part of the paper.Thirdly,using the "substantive control" standard to judge and analyze the status quo of the merger scope of the Structured Entities,and then putting forward the main problems in the merger judgment practice,which include misunderstanding the risk compensation factors in the merger judgment,ignoring the power factors during the set-up phase and the business control,neglecting the comprehensive consideration of both magnitude and variability of variable return,and dividing the main responsibility and the agent casually and so on.Finally,the paper puts forward the opinions and suggestions for the problems found above,advocates the consideration of the risk compensation factors under the framework of the substantive control standards,strengthens the power in the establishment phase,attaches importance to the business control,considers the same importance of magnitude and variability about the variable return factors and also suggests that the distinction between the main responsibility and the agent should be further regulated.