Task 6: Consolidated

Question 1

What to do with interco sales

Answer 1

REVENUE:
Remove the revenue and the same amount from CoS
(Dr Rev / Cr CoS) It feels weird it’s the same amount but I think it’s because your removing the revenue from the seller and the CoS from the Purchaser)

PUP (PROVISION for UNREALISED PROFIT):
Remove the Unrealised Profit (ie work out the profit that would have been made and then calculate the proportion that remains in stock)
(Dr CoS (increase) / Cr Inv)
(Remember this by fact that Inv is ‘overstated’ because selling interco at a profit would increase the Inv cost artificaially)

Question 2

PUP adjustment?

Answer 2

Dr (increase) CoS …… so not a negative number in the workings

Cr Inventory

Remember if you’re just doing a T6 PnL or a SFP you will only use one side of this adjustment since the Dr is PnL & the Cr is SFP

Question 3

Goodwill Impairment (or might be called Amortisation)

Answer 3

Dr Admin costs (not sure why admin costs this was a FI recording example 19.11.20)

Cr Retained Earnings

NB these are on SPL / SFP so could be a ‘one sided’ entry in the workings if only doing one of these in task 6

Question 4

Consolidated SPL
watch out for Sub selling to Parent… for PUP as need to adjust their profit (whoever sells it is ‘harbouring’ the fake profit… see FI lecture 19:11:20)

Answer 4

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