Styleforum › Forums › General › General Chat › accounting question
New Posts  All Forums:Forum Nav:

accounting question

post #1 of 8
5/29/09 at 12:02pm
Thread Starter 
figure there'll be a lot of professionals who can help

i'm learning on consolidated statements,

on inter-trading between Associate and Parent,

for URP when A sells to P

why it is that the URP needs to be debited to grp equity?

since a) A is not part of the grp entity, and b) A sells to P , so URP should be at A, not P

despite what the textbook says i cant seem to convince myself..
Reply
Reply
post #2 of 8
5/29/09 at 12:16pm
I've been an accountant (CPA) for over 25 years, but have a few questions. First, I assume that you are not in the US since some of the terminology you're using doesn't sound like US GAAP, correct? Second, what is URP? Not an acronym I'm familiar with. "Unrealized Profit?"

I think I could give you the entries involve under US GAAP, but it might not be the same as what you're looking for.
Reply
Reply
post #3 of 8
5/29/09 at 1:08pm
Thread Starter 
that's right more like in the UK than US.. yea URP is unrealized profit.. sure, US GAAP sounds good as long as i understand the reasoning behind it.
Reply
Reply
post #4 of 8
5/29/09 at 1:18pm
In the US we refer to it as "intercompany profit". If A is a wholly-owned or majority-owned subsidiary of P and part of the consolidated group, then you would have the following entries in consolidation (under US GAAP)

Debit Sales (for the full amount of the intercompany sale) for say, 100.
Credit COGS (for the amount of A's cost) for say, 80
Credit Inventory (for the amount of URP) for say, 20

The net impact of the 100 reduction in sales and the 80 reduction in cost will be to decrease income by the 20 of URP, which will reduce group equity by this amount when income is closed out into group equity.

I think that's how it works if I understand the question property, though I'm not certain that I do.
Reply
Reply
post #5 of 8
5/29/09 at 2:55pm
Thread Starter 
i'm actually talking about Associate (voting rights of more than 20% less than 50% under IFRS), not subsidiary, so it's trading between Assoc and Parent.

what would be the treatment then under US GAAP?
Reply
Reply
post #6 of 8
5/29/09 at 3:19pm
Quote:
Originally Posted by ikemen View Post
i'm actually talking about Associate (voting rights of more than 20% less than 50% under IFRS), not subsidiary, so it's trading between Assoc and Parent.

what would be the treatment then under US GAAP?

I don't think that concept exists in US GAAP, or if it does, it's been introduced since I got out of the practice. In our way of doing things, these are accounted for using the "equity method" where only the single balance sheet line of "Investment in unconsolidated subsidiaries" is used to capture the Company's share of the equity in the "Associate" and the periodic change to this balance goes to a single line on the income statement "Income/Loss from unconsolidated subsidiaries".

Can't help you at all with IFRS. Sorry.
Reply
Reply
post #7 of 8
5/30/09 at 2:55am
Thread Starter 
that's cool thanks
Reply
Reply
post #8 of 8
8/20/09 at 12:39pm
Out of interest, did you find out the rationale for the accounting treatment under IFRS? I graduated in Accountancy in 2008 and in Singapore FRS context (which is supposedly similar to IFRS) , we use the equity method too.
Reply
Reply
New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: General Chat
Styleforum › Forums › General › General Chat › accounting question