Page 33 - PowerPoint Presentation

COMPLEX GROUPS

Vertical groups - example

• Sale of inventories from Centre Ltd to Right Ltd

• Centre Ltd sold inventories to Right Ltd (subsidiary to parent).
Centre Ltd made the intragroup profit. Cost of sales of Centre Ltd

was thus debited and this decreased the group profit. Right Ltd
purchased the inventories from Centre Ltd, thus the unrealised
profit was included in the closing inventories of Right Ltd at year-
end. The inventories were decreased with the unrealised profit to

eliminate the unrealised intragroup profit.

• Centre Ltd (subsidiary) was making the profit, thus the unrealised

profit in the inventories was shown in the analysis of owners'
equity of Centre Ltd. In other words, the non-controlling interests
were also adjusted. The adjustments were also taken into account

in the consolidated statement of profit or loss and other
comprehensive income (cost of sales) and the consolidated
statement of financial position (inventories).

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