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If a parent deals in some kind of equipment which is therefore included in its inventory. If this equipment is sold to subsidiary on a profit and subsidiary classifies it as non current asset and depreciates it on say 5 years, how would this transaction treated for consolidation purpose.
Hi,
It sounds like you’re thinking about a PUP adjustment for PPE. It applies the same principles as the inventory PUP in that we are making the adjustment due to the single entity concept. As the group is treated as a single entity any transactions need to remove the effect of the sale of the PPE between the parent and subsidiary. This therefore means removing any profit on sale and adjusting for any differences in depreciation.
I wouldn’t focus on this too much however as I believe that it is more something to be tested in F7 than in P2.
Thanks
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