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P2-D2.
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zulfi245
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For consolidated p/l reconciliation why don’t we adjust profit attributable to NCI with intra group expenses and income.
(Even though subsidiary profit is increased/decreased by adjustment)
For example: subsidiary pays interest to parent.
P2-D2
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The adjustment does not impact group profit as by removing the interest expense in one set of books and interest income in the other set of books, there is no net effect on profit. NCI represents what the NCI own of S’s profits within the group and as there is no impact on group profits there is no impact on NCI.
The adjustment is usually made in the adjustments column in the consolidation schedule so ensuring that there is no adjustment to NCI.
zulfi245
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Dr interest income ( subsidiary)
Cr interest expense ( parent)Is different from
Dr interest income ( parent)
Cr interest expense (subsidiary)Whether the subsidiary income decreases or increases(as expense decreased ) as per my concept should affect profit attributable to NCI.
Although group income has not increased or decreased but it seems to me as if subsidiary expense decreases NCI should have credit for it.
( will appreciate if you diagnose my concept issue)
P2-D2
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Hi,
You need to ensure that for any intra-group adjustment (sales/management charges/interest) in the group profit or loss you adjust the adjustment column. You are not adjusting the individual parent or subsidiary accounts, we are just making a consolidation adjustment to reflect the single entity concept. You therefore do not need to think about your debits and credits with regards to the parent or subsidiary, like you’ve done above, and there is no adjustment to the NCI.
Thanks
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