Consolidation of accounts

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Piyush Suhasaria (Querist)
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28 February 2011 Suppose company A is the holding company of 4 companies b,c,d & e. Co. A is in EPC business and co. b,c,d & e does build operate and transfer(BOT) projects. total turover of A includes 20% external contracts and rest 80% from its subsidiaries. subsidiries give the construction of assets contract to A.

On consolidation how should intra group transactions be eliminated? Intra group transactions includes turnover in the books of A which are capitalised in the books of subsidiaries.

Please suggest the consolidation procedure for elimination of intra group transactions.

sandesh mundra

sandesh mundra (Expert)
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28 February 2011 1. Sales to BCDE would be eliminated on one hand.
2. Cost of Goods sold in A pertaining to sales made to BCDE would also be eliminated.
3. Fixed Assets accounted in BCDE would remain as it is, only the profit portion (sales-cost of goods) would have to be eliminated from fixed assets value.
4. Depreciation would have to be recalculated.
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