ACCOUNTANT (Student) (559 Points)
17 September 2011While adjusting the Group Reserves during the Consolidation of Financial Statements between a Subsidary and a Holding Company,
For a transaction of sale carried on by the holding being purchased by the subsidary company, will there not be any adjustment to the minority interested shareholders of the subsidary...
CA RICHA BADALIA
(CA,CS)
(1682 Points)
Replied 17 September 2011
No, there wont be any adjustment in minority interest.Only unrealised profit will get deducted from Condolidated P/L and from the value of asset concerned.
pahuja
(C.A Final Student )
(472 Points)
Replied 17 September 2011
Hi Swetha
There are mainly two kind of transactions done at the time of sale
1 .Downstream Transaction
2. Upstream Transaction
When Parent company i.e holding company sold goods to its subsy then it is an example of downstream transaction
when subsy company sold goods to its parent company then it becomes an example of upstream transaction
in your question it is a case of downstream transaction which means parent company is selling goods to subsy, that means profit is earned by the parent company not by the subsy
and when parent company is earning the profit then his profit and loss account will affect not of subsy which is a.o.p.
I think you may got your answer with your reason and hopefully solve your qurery too.
Thanks and Regards
ACCOUNTANT
(Student)
(559 Points)
Replied 18 September 2011
But the stock which is a part of Subsidary company, and upon which the unrealised profit is to be eliminated,includes something from the reserves of the Subsidiary company....i hope my doubt is clear..
Since the subsidary has paid for the transaction to the Sellin co.(Holding co.)
ACCOUNTANT
(Student)
(559 Points)
Replied 18 September 2011
There even the unrealised profit is included in the stocks of Subsidiary co...so minority interest will have some value...
CA RICHA BADALIA
(CA,CS)
(1682 Points)
Replied 18 September 2011
That is why you have to deduct the value of unrealised profit from stock.Reserves of subsidiary is getting effected in no way as holding has made profit which will be decucted frm the consolidated p/l.
ashish gupta
( student)
(1922 Points)
Replied 18 September 2011
Just think like that if Subsy has bought that goods from outside then ??
Buyer of the goods has nothing to do with the profit margin of the seller. Subsy will show the stock at its cost. it is only the holding which has recorded it as sales and has not realised the profit since it is still lying in the stocks of subsy.
ACCOUNTANT
(Student)
(559 Points)
Replied 18 September 2011
Right i got it........Thank you all......
CA Rohit Jain
(Job)
(30 Points)
Replied 18 September 2011
PLS TELL WHILE PREPARING CONSOLIDATE BALANCE SHEET OF HOLDING AND JOINT VENTURE , HOW MUCH WILL CONTRA AND UNREALISED PROFIT WILL BE DEDUCTED FROM CON. B/S ( i.e. SHARE OF PROFIT OR FULL 100 % )...
ashish gupta
( student)
(1922 Points)
Replied 18 September 2011
you are asking about the unrealised profit / contra items on sales within the group ??
Full 100 % value of unrealised profit is deducted.
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 19 September 2011
sale by Holding Company to subsidary it is a down stream transaction .unrealised profit on stock lying unsold to be eliminated by debit to consolidated P&L of Holding company and reducing stock
CA Rohit Jain
(Job)
(30 Points)
Replied 20 September 2011
THX MR. ASHISH GUPTA , IT MEANS WHILE CONSOLIDATE BALANCE SHEET OF HOLDING WITH ITS JOINT VENTURE , FULL 100 % WILL BE DEDUCTED??? BUT IN STUDY MATERIAL ONLY SHARE OF ASSET WILL BE DEDUCTED IN PERFORMA....
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