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Hello,
From the lecture notes I understood that the treatment of unrealized profit when there is a sale beween A and P is that we always deduct the PUP in calc. W3 (for associate) and then take the appropriate percentage. This means that we calculated also the portion of post acq retained earn. from W5 . The treatment is the same whether P sells to A or A sells to P. Please tell me if I understood this correctly.
The other publishers have a different way, in the case of A sells to P they deduct the % of PUP from Consol ret earn and Inventory (DR Ret earn/CR Inventory) leaving PUP out from Investment in A figure.
Are both methods correct and acceptable by examiner?Yes, you have understood correctly
Strictly just the group’s share of the pup should be deducted consolidated retained earnings and used to reduce the investment in the associate
My way doesn’t seem to prevent a substantial number of students from passing F7 (including one world prize winner) so I can only assume that it’s acceptable to the examiner / markers
And it’s quicker and easier!
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