- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
Hi John,
1) if C owns 75% of R, then “any investment income C receives from R will be recorded in the individual accounts of C only” (from an ACCA practice test). This statement baffles me, could you help by putting it in simpler terms (explaning it)?
2) if a parent company makes a sale to a subsidiary, the NCI amount is not effected. However if the subsidiary makes a sale to the parent company, there is an NCI adjustment. This confuses me. Could you possibly clarify why it is like this in a few words?
1. C and R will both produce their own accounts individually, and C will record all income from investments (including that from R).
C will also produce consolidated statements, but dividends received from R will not be included in them because in the consolidated statements we are already showing all of C’s share of R’s profits.
2. This is referring to the PURP on any of the goods remaining in inventory. As you will know from the free lectures, the PURP affect the profit of whichever company sold the goods to the other. If the parent made the sale then it is the parents profit that is affected (which doesn’t affect the NICI). If the subsidiary made the sale then it is the subsidiaries profit that is affected, which does affect the NCI
Thank you very much, John.
May I ask one last question? What exactly do they mean by “investment income from R (the subsidiary)”. Are they referring simply to the effect of consolidation (i.e. the income as a result from investing in R)? Or are they referring to R ‘investing’ in C (the parent) by some monetary way?
- The topic ‘two small questions about consolidating’ is closed to new replies.