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Consolidated financial statements II

Consolidated statement of profit or

loss – workings

2.1 Issues to consider

Mid-year acquisition

If the parent acquired the subsidiary part way through the reporting period, ensure
that you pro-rate the results of the subsidiary on a line-by-line basis to consolidate
only the post-acquisition period.

Intra-group sales/purchases

Ensure that intra-group sales/purchases are excluded from the consolidated SP&L. If
there is a mid-year acquisition, ensure that only post-acquisition sales/purchases are
excluded from the consolidated SP&L.

Unrealised profit

An adjustment for PURP will result in a reduction in the closing inventory value, and
therefore increase cost of sales in the consolidated SP&L. This will increase cost of
sales and reduce gross profit.

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