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We take off unrealized profit on sale of asset to parent from the RE of the subsidiary while doing the RE Working note. I understand that the transaction itself has no relevance as while consolidating both entities are the same and sale of asset to the same entity makes no sense. But my doubt is when we take of this Unrealized profit aren’t we invariably saying that the subsidiary has no share in this profit? But ideally in the subsidiaries accounts this profit belongs to the NCI right?
But why do we care about the non-controlling interest? If the nci were entitled to the profits of the subsidiary, why would we not simply sell all the inventory and assets of the subsidiary to the parent at a loss … and then tell the nci that they have nothing?
The nci interest in a set of consolidated financial statements is there to tell the members of the parent entity that, OF THE REPORTED FIGURES, the nci is entitled to $XXX
We all know that the nci isn’t going to see any of that $XXX unless they are really lucky – in fact, they’re likely to receive $Diddly Squat
But our own, parent entity’s members should be informed about the entitlement of this snivelling group of unimportant nuisances to the profits of the group for the year
OK?
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