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We adjust the intra group PUP for the unsold inventory. What to do in case of the services?For example A holds B. B pays interest of CU 1000 to A every year. This lead to expense in the subsidiary and an income for the holding. Do we have to adjust the whole figures of CU 1000 as PUP adjustment in the working 2 of the Net Assets inorder to derive the post acquision profit? ( Suppose loan was provided by A to B after the acquisition only)
Can you please help for this as i am confused for the under taking the correct figure of the post acquisition profits?
Hi,
The interest is intra-company and so is eliminted in the same fashion as for the intra-group sales.
Thanks
Does the same thing goes for the management service and fees also between the group?
Still i didn’t get the logic. Can you please help?Hi,
Yes, it is the same logic. Any amount of intra-group income and expenditure is eliminated. The logic is that the transactions have not occurred outside of the group, and the group accounts are prepared on the single entity concept, therefore we only report transactions between the group and the outside world and not transactions between group members.
Thanks
What is the difference between the Intra Group Transaction and the PUP ? Does any PUP exists in case of the sale of Service ?
Hi,
The PUP arises due to the intra group transaction, i.e. the sale of inventory between the parent and subsidiary.
When there is a service provided then there is no PUP and we simply eliminate the intra-group management fee between the companies in the group accounts.
Thanks
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