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Sir , i know we need to eliminated all the intra transaction between parent and subsidiary in prepare the consolidated financial statement . However , i saw a few question in BPP revision kits , it recognise the intra group loan interest .
Here is what the question said :
Brigham has owned 70% of Dorset for many years . It also holds a $5 million 8% loan note form Dorset . One of Dorset assets has suffered an impairment of $50,000 during the year . There is a balance in revaluation surplus of Dorset of $30,000 in respect of this assets . This impairment has not yet been recorded .
The entity financial statement of Dorset show a profit fot the year $1.3 millionWhat is the amount attribute to the non-controlling interest in the consolidated statement of profit or loss ?
The answer from the BPP revesion kits
Profit for the year $1,300,000
Intra Group Interest ($400,000)
Impairment ($20,000)
$880,000Profit attribute to NCI = $880,000 x 30%
= $264,000However , we shall eliminated the intra group interest right , therefore we should not deduct the interest right ( if Dorset has not yet take into account the Interest ) , and we should add it back to the profit right ( if Dorset already take the interest into account )
please tell me what your thought about this question , whether is the question problem or i misunderstanding any thing .
The elimination of the intra-group loan interest payable and receivable is done for the purposes of presentation in the consolidated statement of profit or loss
But, from Dorset’s point of view, this is a finance cost and the Dorset profits are correctly reduced
This, in turn, reduces the size of the pie of which the nci is entitled to a slice
OK?
so will the finance cost still present in the consolidated profit & loss ? or only where calculate the profit attribute to NCI ?
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