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Hi sir, regarding sales between a parent and a associate. As a result of the sale, if there are balances(payables and receivables) between them , they don’t need to be eliminated, since associate is generally considered to be outside a group right? Therefore, no adjustment is required.
What if these balances recorded in both the parent’s books and the associate’s book does not agree with each other .. Are any adjustments required to reconcile these amounts just like how we do it for a subsidiary or no adjustment is needed sir ?
When accounting for an associate, we take the associate’s profit after taxation and we apply the group’s percentage holding to that profit
Any cash or goods in transit – the cause of any out-of-balance situation – are adjustments that affect the statement of financial position. They don’t affect the statement of profit or loss
So when we compute workings W3 and W5A Consolidated Retained earnings and investment in Associate we continue as normal to take the group’s share of the associate’s profit after taxation and include that figure in the two workings
So, in answer to your question, no, we do not attempt to reconcile the two current accounts
You write “since associate is generally considered to be outside a group”
No, it isn’t generally considered! It is a FACT that the associate is not a group entity
OK?
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