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Hello Sir,
I am having the following issues in intra-group trading in SOFP.
1) Subsidiary to Parent Sales:
***The part of the profit on the sales of goods attributable to the NCI is considered to have been fully realized but the part attributable to the subsidiary is not.***Question # 01 : Why do we remove NCI part of the profit which has been realized by passing this entry?
GROUP RE
NCI (Unrealized Profit * NCI Holding %age)
To Group InventoryIs the purpose of this to eliminate the whole profit rather than the unrealized part of it?
2) Parent to Subsidiary Sales:
*** Note that the adjustment to the NCI only occurs when the sale is from subsidiary to the parent (where the unrealized profit is in the subsidiary). If the sale was from the parent to the subsidiary, then there is no adjustment to the NCI. BPP STUDY TEXT***Question # 02 : When parent sell goods to partly owned subsidiary, shouldn’t the part of the profit on the goods sold attributable to NCI be considered realized as well?
1. We do not remove the realised profit. We remove the unrealised profit. The company that sold the goods to the other company will have recorded the profit on the sale, but if these goods are still inventory then that profit has not been realised.
2. If the parent has sold the goods to the subsidiary then it is the parent who has recorded the profit on the sale. If the goods are still in inventory with the subsidiary then the profit has not been realised and it is the parent’s profit that needs reducing. The NCI is not affected.
This is all explained in my free lectures on consolidations. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well. They are the same as the lectures you would be receiving if you were attending a normal classroom course.
Sir, Thanks for replying!
Yes, I am watching your lectures and these are quite helpful.
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