I was wondering how to adjust for intercompany sales and PUP for mid-year acquisition.
For example if company A acquired 100% of the shares of company B on 01/07/2017 and publishes its consolidated accounts on 31/12/2017.
During the year, company B sold 100 000 CU to company A with a 25% margin and at the end of the year there remains 50% of those goods in A inventory.
Should we deduct from the sales 50% of the intercompany sales and 50% of the PUP? (Since July 1st is at half year point)
Or something else?
The PURP is calculated on the inventory at the end of the financial year, and the whole of the PURP is subtracted from the inventory in the SOFP and added to the cost of sales in the SOPL.
As far as the sales during the year are concerned, 50% will be subtracted from both the sales revenue and the cost of sales in the SOPL (assuming that the sales were spread evenly during the year, which you would always assume unless told differently).
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