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hello sir, if the parent company sold inventory to the subsidiary should we less the intra group trading in the consolidated financial statement or we less only the unrealised profit. also what if the subsidiary sold to the parent on credit what should happen? should we council the intra group trading or what.
thanksBoth of these are dealt with in our free lectures on consolidations – I cannot type out the whole of the lectures here 🙂
Our free lectures are a complete course for Paper F3 and cover everything needed to be able to pass the exam well.
Dear Sir,
I had a question on goodwill.
When the parent company pays for the goodwill on acquisition, it would mean that it is a purchased goodwill , then why does it not appear in parent company’s individual Balance sheet as a separate item. It is clubbed in the gross amount as in investment in subsidiary.
It is only in consolidation that goodwill is shown as a separate item.
Thanks,
That would only apply if they were buying the whole of the subsidiary company and making it part of their company (by closing down the subsidiary).
They are not doing that – the two companies are remaining as two separate legal entities, and so in the SOFP of the parent company it is simply an investment.
The reason we are required to produce consolidated statements is exactly because although they are two separate legal entities with their own SOFP’s, it is effectively as though it is “one big company” (even though not in law) and in the consolidated SOFP we therefore do show goodwill.
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