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I am going through the mini excercises in the notes for calculation of PUP.
I understand that the PUP should be deducted from the company that is showing the profit however in the answers when an associate is involved whether it be as seller or buyer the profit seems to be adjusted in the associates accounts.
Why is this?
Thanks for the help and the lectures.
Because an associate is not a group company, it would be inappropriate to eliminate the pup from profits and from inventory.
However, the IFRSIC (IFRS interpretations committee) decided that it WOULD BE appropriate to eliminate the group’s share of the pup. Now, the easy way to do this (and it gives a slightly different answer to the published answers) is to eliminate the full pup IN THE ASSOCIATE’S retained earnings. After that adjustment is made, the parent then takes the group’s share of the associate’s post acquisition profits. In that way, the group is eliminating just the group’s share of the pup.
Is that clear? If not, post again and I’ll try again!
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