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While preparing the Consolidated SOFP including Subsidiary and associate, and the Provision to remove Unrealised Profit occurs on the both case, the full value of PURP is deducted in RE in case of Subsidiary (whatever % is owned by Parent) while in case of Associate,PURP is multiplied by the parent owning %in Associate and this amount is deducted in RE,not the full as like subsidiary.
What is the reason for such difference in treatment of PURP ?
Hi,
When we are accounting for the associate we use equity accounting, which is where we account for the influence that we have over the company. We account for our influence by recording our share of the profits/losses of the associate.
If we only account for our share of the profits then we will also only account for our share of the PURP as that is what we have the influence over.
Thanks
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