Simple consolidation question

Simple consolidation question

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Hi,

Can someone confirm that I am correct? Subsidiary A sells to Subsidiary B (same top co) goods it buys at cost. Subsidiary B sells to consumer a package compromising of service+these goods. On Group consolidation, I would have thought that a consol adj would be DR Sales CR COS of the intercompany sales? Auditors are less than interested as no profit element of items left in stock and saying no adjustment but I think this is incorrect?

Matthew

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By johngroganjga
01st Mar 2015 20:38

Yes you eliminate infra group transactions on consolidation. Otherwise sales of the same good are being counted twice.

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By MDK45
01st Mar 2015 20:32

Thank you, exactly as i thought. Gross margin not affected but of course sales and cos. over inflated. Thought i was going mad, the sales are material as well so no excuse. I had that feeling someone was being so irrational that i was doubting myself....

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