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COMPLEX GROUPS


            Vertical groups - example




            Unrealised profits included in inventories


            • Sale of inventories from Left Ltd to Centre Ltd


            • Left Ltd sold inventories to Centre Ltd (parent to subsidiary).
                Left Ltd made the intragroup profit. Cost of sales of Left Ltd
                was thus debited and this decreased the group profit.


            • Centre Ltd purchased the inventories from Left Ltd, thus the

                unrealised profit was included in the closing inventories of
                Centre Ltd at year-end. Inventories were decreased with the

                unrealised profit to eliminate the unrealised intragroup profit.


            • Left Ltd (parent) was making the profit, thus the unrealised
                profit in the inventories was not shown in the analysis of

                owners' equity of Centre Ltd. In other words: the non-
                controlling interests were not affected. The adjustments were

                taken into account in the consolidated statement of profit or
                loss and other comprehensive income (cost of sales) and

                consolidated statement of financial position (inventories).


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