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    • Its in the additional info.
      This was the loss made from the goods Vader(parent) sold to Maul(subsidiary) and the loss was incurred but it will not be recorded is taken to be borne by the parent already so will only account for goods by removing from the revenue and adding to cost of sales

      • in my understanding, if P made the sale to S, in P’s books, they would have incorporated the loss of 5M. when the group SPLOCI was done, the loss was not removed hence it was realised. no adj’s are made for unrealised losses only profits for inter-co trading. According to prudence there may be no guarantee that the sale to a 3rd party outside the group would happen, so profits inter-co should not be realised until sold to a outside party. however losses should be realised due to the fact that the loss will still occur regardless being sold or not, once it is arms length transaction (genuine loss).
        if its not a arms lenght tranasction (not a genuine loss), lets assume P sold to S as a favor because S has Cash flow problems or whatnot but S still can sell to a 3rd party making a profit and recovering the initial loss. in this case it is not at arms length so should not be realised. Unless told otherwise it would be at arms lenght
        i hope this helps

  2. Why do we adjust the sub for impairment and not the parent when it’s FV? If proportionate I thought both get share, if FV then Parent takes cost of impairment..?

    As per previous comment where does $5m loss come from, no mention of mark up, margin or selling price in question?

    Good lecture.

    • Agree. Vader would have been recorded revenue of $20m and cost of sales $25m (therefore loss of $5m) in this transaction, therefore I think the adj should be to reduce revenue by $25m and COS by $25m. Could anyone help to clarify? Thank you

    • Hi Sean,
      Thought the same as you. Example 3 is the next video. They need switching around so they are in same order as notes

      Also just to noticed typo in notes, Example 3 (pg 17) says Finn in first bullet point where should be Han.

      Hope this helps. Keep up the good work OT 馃槈

      Dave

  5. Hello lec, I face a case that: Company A set up a new entity X with 80% ownership. Company A wants to transfer the revenue and expenses to this new entity, (Revenue = $570,000 and expense = $334,000). So what is the account treatment of the these two entities?

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