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When an asset is sold by a holding to it’s subsidiary, the sub depreciates the asset at it’s cost not the cost of the group. Under consolidation we eliminate both the intra group sales eg; A is holding of B
A sold to B a car from inventory costing 100 for 140; Suppose Depreciation is 10%Now we Do
SOPL
Particulars A B Adj Group
Sales 140 – -140 –
COS -100 – 100 –
Depn – 14 – –Since B has depreciated at 140, there is CU 4 as extra depreciation. DO we adjust this at B’s column or Adj column.
Main thing is Does this extra reversal of CU 4 increase the profit stake of the NCI in the SUB ?Thanks
Hi,
Why would we e depreciating inventory? We only depreciate PPE. I think that you’re crossing the sale of inventory with the sale of PPE.
For the sale of the inventory, we remove the PUP which is calculated on the goods that remain in inventory at the reporting date. Regardless of whether any goods are still held we need to remove the revenue and costs in full.
For the sale of PPE, the profit on disposal is removed and an adjustment is made for the difference in depreciation between what is charged now and what was previously charged.
Hope that helps.
Thanks
I mean that inventory of holding now becomes the PPE of the Group. I wanted to know that When we prepare Group SOPL;
1. We need to eliminate Sales and COS of holding no ? ( If it is the normal sales of HO, so in the adjustment column deduct 140 from sales and 100 from the COS) Is this treatment correct ?
2. When we eliminate the extra depreciation, do we adjust this in the sub column or the adjustment column ? ( Since eliminating the extra depn increase the profit, is this fully attributable to holding or the NCI too ?)
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