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lets say , the parent company have sold some goods to its subsidiary during the year .
In the end of the financial year , the subsidiary have no any goods left , which purchases from its parent company .Question : Is there any adjustment required , or just add those figure together ,since there is no any ” unrealised profit ” .
There is no adjustment for unrealised profits because, so far as the group is concerned, all those intra-group traded goods have now been sold outside the group so the profit is realised
However, there is still the simple elimination of the intra-group sale from both revenue and from cost of sales, $ for $
Where one entity sells to another within the group, say $15,000 worth of goods, then we need to reduce revenue by $15,000 and we need to reduce cost of sales by $15,000
Then, normally, we have to worry about the calculation and elimination of the unrealised profits and the adjustment is in the seller’s records
Dr (increase) cost of sales on the statement of profit or loss
Cr (decrease) inventory on the statement of financial positionOK?
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