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I’ve been doing past papers and in the June 2014 paper I have come across the groups share of the Associates PUP being added to the cost of sales.
I assumed that the PUP is removed from the group share of the associates profit rather than make adjustments to the group cost of sales.
Could someone please clarify for me
If you were to reduce the Ventor post-acquisition profits by the full $3 million profit on the sale to Ventor, we would then take Penketh’s 30% of those reduced profits
In that way we automatically have eliminated the group’s share of the unrealised profits that arose on that transaction with the associate and at the same time we reduce the value of the parent’s Investment in Associate from working W5A
Other tuition providers take the pup to cost of sales (by decreasing group inventory which increases cost of sales and thereby reduces the profit for the year)
I prefer to take the adjustment through the associate’s retained earnings
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