FAR 3 Intercompany transactions Flashcards
Eliminate 100% of Intercompany transactions
1. Balance sheet 100% eliminate
a. Eliminate 100% of all intercompany payables and receivables
b. Eliminate 100% of intercompany gross profit in ending inventory and fixed assets of parent or subsidiary
_2. Income statement 100% eliminate _
a. Interest expense/income
b. Gain on sale / Depreciation expense
c. Sales/ COGS
**3. Not consolidated = not eliminated **
Intercompany merchandise transactions
Intercompany sales
Retained earnings
Intercompany COGS COGS Ending inventory
Intercompany BOND transactions
If one member of the consolidated group acquires an affiliate’s debt from an outsider, the debt is considered to be retired and a gain/loss is recognized on the consolidated income statement.
Price paid - BV of debt = gain/loss