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Hi Sir,
I’d like to know the treatment of provision of unrealised profit (purp) in Net assets and Retained Earnings when computing group consolidated statements. In Kaplan exam kit (March 2017 session) question 384: includes purp in retained earnings, not in net assets; question 385: includes purp in net assets, not in retained earnings. Can you please shed light on the correct rule to follow?
Thank you,
RitaRita, I don’t have any Kaplan, nor BPP, nor any other publisher’s material, sorry
However, if I lead you back to those hazy days of F3 (or University if you were exempt F3) you may remember that THE fundamental accounting equation was …
Shareholders’ Funds = Net Assets
So, for both question 384 and question 385 it appears that Kaplan have, one way or another, taken proper account of the pup either by deducting it from consolidated net assets (and thereby reducing consolidated retained earnings) or by reducing consolidated retained earnings (and thereby also reducing consolidated net assets)
It’s like love and marriage (that old, old song) … you can’t have one without the other!
Bit of an old-fashioned idea, I admit!
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