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Consolidated financial statements II

Consolidated statement of profit or loss

1.1 Introduction

Preparation of the consolidated statement of profit or loss requires application of
similar principles to those used when preparing the statement of financial position.
Many of the principles that affect the consolidated SOFP are also relevant to the
consolidated SP&L as follows:

 The income and expenses of the parent and subsidiary are added together on a
line-by-line basis.

 Intra-group transactions and balances must be eliminated – any transactions
between parent and subsidiary, such as such and sales and purchases, interest
receivable and interest payable, and dividends received form the subsidiary are
cancelled and excluded from the consolidated SP&L.

 Unrealised profit on intra-group transactions must be eliminated (PURP). This
usually relates to unrealised profit in closing inventory, which will increase cost
of sales in the consolidated SP&L.

 The group profit after tax is allocated between amounts attributable to the
parent and the non-controlling interest respectively and is presented
immediately below the group profit after tax.

 Uniform accounting policies must be used when preparing the consolidated
SP&L.

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