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When doing the conolidated Income statement where there is an associate company. Say the associate sells goods to the parent & some of these goods are still in stock at year end. Now when doing the consolidated income statement. Should the profit on the unsold goods still in the parents posession be eliminated ? and what of the value of the stock in the parent’s books. They bought from an associate who have taken a profit on the transaction. The fact that you do not add into revenue & cost of sales etc of the associate suggests that the whole trade should be ignored but I still wonder about the valuation of inventory and as yet unrealised profit. Many Thanks
Standards Interpretation Committee said that “it is appropriate to eliminate THE PARENT’S SHARE of the unrealised profit” and the easiest way of doing that is to eliminate the FULL amount of the pup from the ASSOCIATE’S results. Then we take ( for working 3 and for working 5b ) the parent’s share of the Assoc’s profit after tax ( which has been reduced by the full pup )
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