Page 337 - F3 -FA Integrated Workbook STUDENT 2018-19

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 the results of the subsidiary are pro-rated on a line-by-line basis to consolidate
only the post-acquisition period.

Intra-group sales and purchases

Ensure that the full value of intra-group sales and purchases are excluded from the
consolidated SP&L. If there is a mid-year acquisition, ensure that only post-
acquisition sales and purchases between the parent and subsidiary are excluded
from the consolidated SP&L.

Unrealised profit (PURP)

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

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