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 ?
With subsidiaries you are preparing accounts for whole group as parent has power to control whole group even though it might not own all shares in any given subsidiary.Therefore, since it has this power to control group assets. and liabilities other than those cancelled out by intergroup trading and loans are simply added together and the non-controlling interests share of groups equity merely shown at end.With associates since associates can’t be controlled but are not simply investments as company has significant influence in them they are shown using equity method on statement of financial position.
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