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when making adjustments for prov. on unrealised profit on assets transferred at a profit, why do you reduce the inventory of the seller? I would assume that since the buyer was the one who recognised the increase in the value of that inventory in its books, the reversal would be done in the buyer’s inventory.
This is explained on the video! However, for your benefit, does it make any difference to your inventory figure if I put 500 + 300 – 20 or 500 – 20 + 300?
No!
However, the pup HAS to be removed from the seller’s retained earnings because it is the seller who has RECOGNISED this profit within their retained earnings figure. If you deduct the pup from the wrong company, that will change your answer for the nci calculation and for the Consolidated Retained Earnings calculation
Thank you for replying. I had watched the video where u said that; I just wanted to calrify the principle behind the way u treated the decrease in inventory.
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