Page 12 - PowerPoint Presentation

CONSOLIDATIONS AFTER THE DATE OF ACQUISITION

Inventories

• Unrealised profit in opening inventory

• When the consolidation is performed at the end of the year,
the consolidation journals which were recorded during the

previous year’s consolidation, will not be reflected in the
financial statements.

• Remember that consolidation journals are pro forma journals

and are only done in the consolidation working papers; they

are not actually processed through the accounting system.

• The current year’s opening inventory will not agree with the
previous year’s closing inventory because the unrealised profit

was eliminated from the closing inventory of the previous
year, but not from the opening inventory of the current year.

The unrealised profit must be eliminated from the opening
inventory so that it will agree with the closing inventory of the

previous year

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