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Subsidiary Inventory Valuation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Subsidiary Inventory Valuation

  • This topic has 5 replies, 2 voices, and was last updated 9 years ago by charm.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • February 1, 2016 at 2:07 am #298766
    charm
    Participant
    • Topics: 3
    • Replies: 6
    • ☆

    Dear Sir,
    I want to known about,
    One of subsidiary company sales another subsidiary (inta-group transactions) with margin (20%). In this situation how IAS requirement have in the inventory valuation of subsidiary Financial Reports (Not Consolidation Report).
    Thank You
    Charm Myae Aung

    February 1, 2016 at 8:47 pm #298893
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    The key is that the subsidiary is a separate legal entity, so regardless of who it sells any goods to, the inventory is valued at the lower of cost and net realisable value. Just because the company is a subsidiary of another entity doesn’t mean that there are any different rules.

    As you seem aware there could then be a consolidation adjustment to remove any intra group profit on goods that are unsold outside of the group at year-end.

    Thanks

    Chris

    February 3, 2016 at 3:35 pm #299101
    charm
    Participant
    • Topics: 3
    • Replies: 6
    • ☆

    Thank you Chris ,

    Subsidiary is a separate legal entity, so IAS 2 is require in valuation of inventory.

    Only to remove intra group profit , conso adjustment require in conso statements.

    Thank you for your answer , I am clear now.

    In addition , to make conso adjustment for conso statements for inventory that unsold outside of the group at the year end , any disclosure require or not in the subsidiary financial statements? If require please refer IAS number and reference.
    I think related party disclosure is require in this situition.If true , only related party disclosure is enough to make conso adjustment.
    Thank You
    Charm Myae Aung

    February 4, 2016 at 8:44 am #299217
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    There’s no particular requirement to disclose the level of unsold intra-group inventory. It will be disclosed along with the rest of the unsold inventory in the inventory disclosure note as per IAS2. This requires us to split the year-end inventory into RM/WIP/FG.

    Yes, you’re correct about the usual RP disclosures in IAS 24.

    Thanks

    February 4, 2016 at 1:01 pm #299259
    charm
    Participant
    • Topics: 3
    • Replies: 6
    • ☆

    Thank You

    February 4, 2016 at 4:16 pm #299285
    charm
    Participant
    • Topics: 3
    • Replies: 6
    • ☆

    But sir,
    I don’t known ecactly ,
    If subsidiary company not disclose inventory(that inventory are purchase from parient company with margin and remain unsold), How Parient company can known subsidiary’s inventory balances unsold outside the group at year-end to make conso adjustment? How can receive information about this? Because inventory balances on subsidiary can be both (balance purchase from parient company with transfer price) and (balance purchase from other suppliers).

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    Posts
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