Page 18 - 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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