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Help me please with PUP when Associate sell goods to Parent.
All examples I saw are about sales from P to A (we have to decrease A’s profit by 100% of PUP) but what if vice versa – when A sell goods to P and those goods still in P’s inventory?For instance: P has 25% of A. At reporting period A sold $100 000 (Gross profit 10%) to P and all goods still in P’s inventory.
Correct adjustment would be the same?
We should reduce A’s profit for $2 500 (10%*$100 000*25%)?
Have it any effect on inventory?I suggest ( and in the ot video lectures it’s the same ) that you put the full pup adjustment throught he associate ie, in your example, I would reduce A’s profits by 10,000. then when computing P’s share of A’s profits after tax, we shall automatically eliminate P’s share of the unrealised profit.
Incidentally, the “normal” rule for pup is that it’s eliminated in the selling company’s records so your statement “All examples I saw are about sales from P to A (we have to decrease A’s profit by 100% of PUP)” is incorrect! the amount of the pup should in that case be eliminated in P’s records NOT IN A’S
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