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Dear tutor.
I go through a exercise that got intra interest cost amongst group (ie, parent lent to subsidiary) and i’m wondering if we need to adjusted NCI profit after tax for this item in consolidated SPL.
The proforma that i see in textbook like:
Subsidiary profit for the year
Less: Fair value depreciation
Less: Impairment
Less: PUP (if sub sells to parent)
Adjusted profit
Then NCI = % of adjusted profit.
IMO, i think this is also needed to be added back to sub’s profit since it is not a cost to sub. I try to go through the textbook meticulously but just can not find this issue anywhere.
Can you help me to justify this. If yes, why is it and if no, why not?
Sorry for my messy typing. I hope my point is clear to you.
ThanksHi,
You will need to correctly account for the interest first within the subsidiary’s accounts. This will then adjust the profit for the year and so will impact the NCI.
A separate adjustment is then required to eliminate the intra-group interest from the consolidated accounts.
Thanks
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