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Consolidation- Intra group sale of Non current asset at profit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Consolidation- Intra group sale of Non current asset at profit

  • This topic has 5 replies, 2 voices, and was last updated 8 years ago by MikeLittle.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • August 20, 2016 at 5:37 pm #334244
    satheesh90
    Member
    • Topics: 36
    • Replies: 25
    • ☆☆

    Sir,

    A 75% subsidiary S transferred A non current asset to P at a profit .So as per my understanding the adjustment for the profit is to be made under the retained earning of S and the excess depreciation on the profit portion to be adjusted against the retained earning of P.

    Is it correct ? because I have seen in one text (BPP) the depreciation is being adjusted with Retained earning of S.

    Kindly clear my doubt.

    Satheesh RV

    August 20, 2016 at 6:20 pm #334251
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    ‘… and the excess depreciation on the profit portion to be adjusted against the retained earning of P.
    …’

    You’re wrong, sorry Satheesh

    The NET unrealised profit is deducted from the retained earnings of the selling entity

    The cost deduction is obvious

    But the depreciation adjustment also adjusts the SELLER’S retained earnings – it’s as though that element of the asset that is used up (measured by the depreciation) is realised over time so the original amount treated as unrealised will over time become a realised profit

    OK?

    August 20, 2016 at 7:24 pm #334269
    satheesh90
    Member
    • Topics: 36
    • Replies: 25
    • ☆☆

    Ok sir, but my doubt is as the excess depreciation in charged in the buyer’s P&L and so why the reinstatement of the same is not done in the buyers books itself .

    Satheesh RV

    August 20, 2016 at 7:50 pm #334273
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    That’s a sensible question but I’ve just told you what to do!

    It’s a consolidation adjustment – the buyer’s figures are not altered – it’s only for the consolidation!

    August 20, 2016 at 8:30 pm #334276
    satheesh90
    Member
    • Topics: 36
    • Replies: 25
    • ☆☆

    OK.. thanks

    August 20, 2016 at 10:20 pm #334282
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    You’re welcome

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    Posts
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