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Intercompany Transactions - Coggle Diagram
Intercompany Transactions
Be able to
account for the following transactions
in the
consolidated financial statements
Intragroup
Balances
Loans
Intragroup
Transactions
Trading Inventories
Unrealised Profit in:
Closing Inventories
Opening Inventories
Property, Plant and Equipment
Unrealised Profit in:
Non-depreciable Property
Depreciable Property, Plant and Equipment
Consolidation of
Loans
In the SFP a recorded transaction shows that
P limited issued a loan to S limited
and has a
investment recorded
Dr Loan to subsidiary
Cr Bank
S limited also has the
loan recorded as liability
in its
SFP
Dr Bank
Cr loan from parent
These
loans
need to be
eliminated
on consolidation pro-forma journal
Dr Loan from parent
Cr Loan to subsidiary
In the SFP under
Loan Term borrowings
only represent
loans of the parent
Intragroup Sale of Inventories
Unrealised Profit in Closing Inventories
One of the most common forms of
intragroup transactions
is the
sale of
(usually at a profit)
of inventories
by one entity to another in the
same group
Example
P ltd
sold Inventories to
S ltd
at
cost price plus 25%
.
Total Sales of Inventories
from P ltd to S ltd during the current reporting period
amounted to R100 000
Journal by Parent
(P)
DR
Account Receivable
(S)
CR
Revenue- Sub Sale
R100 000
R100 000
DR
Cost Of Sales
CR
Inventories
R80 000
R80 000
At the
end of the reporting period
,
S ltd had R50 000 of Inventories on hand
which were purchased from P ltd
Journal by Sub
(S)
DR
Inventory- Cost of good Sold
CR
Account Payable
(P)
R100 000
R100 000
elimination
of the
unrealised Intragroup Sale
consolidation journal entry
GROUP'S PERSPECTIVE
Ankir we had sold to the Sub, now we have to reverse the full amount of revenue since its still within the group borders
DR
Revenue- Sub Sale
CR
Inventory- Cost of goods Sold
Elimination of intragroup sales
R100 000
R100 000
Elimination of unrealised profit Contained in Closing Inventory