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Dear Sir
I have watched your lectures on consolidation but i dont understand why does a parent company have to sell inventory at a profit to its own subsidiary company;the profit would anyway have to be cancelled.It’s only cancelled in the consolidated financial statements for the group. For the legal entity that is the parent, the financial statements would include the profit.
You don’t need to know why for the purpose of accounting for intra-group unrealised profit in Financial Accounting but consider this … a company would have no incentive to sell goods/provide services to other companies in the group if it had to transfer them at cost and not make any profit on them.
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