Page 362 - F1 Integrated Workbook STUDENT 2018
P. 362
Chapter 21
Trading with the associate
3.1 Intra-group balances
No adjustments are required for transactions and balances arising
between the parent company and associate as such items are regarded
as being outside of the group. We do however adjust for the group's
share of the PURP.
3.2 Provision for unrealised profits (PURP)
% of shareholding × total unrealised profit in inventory
The adjustment if the parent sells to the associate:
decrease group reserves (W5)
decrease investment in associate (W6).
This will also increase the cost of sales in the CSP&L, hence reduce profits.
The adjustment if the associate sells to the parent:
decrease the group reserves (W5)
decrease the group inventory.
This will also reduce the share of the associates profit in the CSP&L.
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