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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