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Hi Mike,
When a parent sells goods to an associate, i understand that the Intra group profit which is unrealised is eliminated on consolidation, by perhaps the following journal
Dr Share of Profit of Associate (CSOPL)
Cr Investment in Associate (CSOFP)But what about the Group revenue figure?? In theory this should be reduced by the amount of the Intra Group sale to the associate, but a recent question i worked on, only made an adjustment for the URP on trading with an associate…no adjustment was made to cancel Intra group revenue….then again though, what would the consolidation adjustment be if the parent traded with the associate???……Dr Group Revenue, Cr ????….
Thanks
Liam Foley
Because the associate is NOT a group company, there is no concept of cancellation of revenue nor cost of sales.
The only affect is the elimination of the group’s share of any pup arising on a transaction with the associate
Dr retained earnings Cr investment in associate
The debit is shown in the working W3 consolidated retained earnings and the credit is seen to affect working W5A Investment in associate
hi mike,could you please tell me what would be the treatment for revaluation in consolidation profit and loss a/c…. its said the the revaluation loss for parents was 2000 and revaluation gain for subsidiary was 3000 and on the other hand there was a note that subsdiarys rev of 2000 occurs at the date of acq and the rest 1000 occurs at the reporting date….
the subsidiary 2,000 revaluation increase will feature in working W2 Goodwill as a fair value adjustment.
The post acquisition movement of 1,000 revaluation is treated in exactly the same way as a post acquisition movement in retained earnings! The group’s share of the 1,000 will be consolidated with the parent’s own revaluation reserve and the nci’s share will be added to their amount So for the consolidated Revaluation Reserve it’s the same old song! “H’s own + H’s share of S post-acq retained (less any impairment -not applicable here)”
So working W4A NCI on the Balance Sheet is now “Value at date of acquisition + their share of post acquisition retained (+ their share of post acquisition revaluation!!!) less their share of any impairment”
OK?
exactly what i needed… thanks but you did not mentioned what would be treatment for income statement is it ( p revaluation +s revaluation*mid year)
The combined revaluation movement of $1,000 loss (H + the whole of the post-acquisition S) will be shown NOT in the statement of profit or loss but in the statement of comprehensive income and in the statement of changes in equity
Ok?
Hi Mike,
As you reply above, when Parent sell goods to Associate, URP need to be adjusted by the journal entry of DR Retained Earning/CR Investment in Associate.
I want to know what is adjusment entry for the URP in case of the Associate sell goods to Parent company and there is URP at the year end?
Thanks
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