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Hi Sir,
I am working on PUP on intra-group trading with associate ang would like to ask you whether anything wrong in my understanding as belows.
We have 2 cases:
Case 1: Parent (P) sells goods to Assciate (A) and
Case 2: A sells goods to PFor Case 1, the profit is eliminated full 100%.
For Case 2, the profit is eliminated based on proportion of hodling acquires which P hold (eg: profit*30%)Based on my understanding, I am not clear with the elimination entry for PUP of Mock Exam 2 in BPP Kit. Parent (Beth) sold to Associate (Gain) but the amount to eliminate is profit*30%. Is there any misunderstanding?
Please help me. Many thanks.
Hi,
When accounting for an associate the key aspect to consider is the level of influence, which is determined in the main by the shareholding. Therefore when adjusting for PUPs between the group and the associate we will always adjust for our share of the PUP, regardless of the direction of the sale, as we are reflecting the level of influence over the transaction.
Thanks
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