Page 239 - FR Integrated Workbook 2018-19

Consolidated statement of financial position

Illustrations and further practice

You can now attempt TYU question 5 from Chapter 17.

3.3 PUP adjustments – inventory

At the reporting date if a group company holds inventory that has been purchased
from another group company, the profit included within that inventory is removed by
means of a Provision for Unrealised Profit (PUP) adjustment. The impact is to
reduce the value of inventory to its group cost and reduce the retained earnings of
the selling company. If the Parent is the seller reduce (W5), and where the
Subsidiary is the seller reduce the Reporting Date column in (W2).

3.4 PUP adjustments – non-current assets

At the reporting date if a group company holds a non-current asset that has been
purchased from another group company, the profit included within that non-current
asset is removed by means of a Provision for Unrealised Profit (PUP) adjustment.
The impact is to reduce the value of the asset to its group cost.

For PUPs on non-current assets there are two adjustments to retained
earnings. The seller’s retained earnings are reduced by the total
original profit on the asset, while the purchaser’s retained earnings are
increased by the value of the excess depreciation charged.

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