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What is the theory and treatment for intracompany trading losses, when consolidating?
Lets assume:
Company A sold inventory to Company B at its fair value of $12 million. Company A made a loss on the transaction of $2 million and Company B still holds $8 million of this inventory at the year end.
If it was unrealised profit, the profit on any goods that remain in the inventory at year end would have to be removed from the buyers inventory and the sellers retained earning – do we need to do the opposite as it’s a loss? I.e increase buyers inventory and increase retained earning?
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