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Hi,
My textbooks say that adjustments for these transactions are as follows:
1. Unrealised profit will be adjusted in the accounts of the selling company
2. Depreciation adjustment will be adjusted in the accounts of the buying company
However, when I’m looking at solutions to problems involving these type of transactions, I noted that adjustments for 1 & 2 are both charged to subsidiary and therefore NCI gets a share for both. I refer also to a previous question posted as per below:https://opentuition.com/topic/intra-group-sales-of-non-current-assets-2/
Please advise if my 1 & 2 as per above are wrong.
Thanks
You’re half correct and the textbook is incorrect
Both adjustments are made in the one set of records
But that isn’t always in the subsidiary
The appropriate entries are to be made (both of them, profit and depreciation) in the records of the selling entity
It USED to be the case that the profit was adjusted in the selling entity and the depreciation was adjusted in the buying entity
But that rule changed some 3 years ago – are you using an old text book?
OK
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