I have been asked to set up the consolidation in an accounts system as part of a new role.
There are 3 wholley owned subs & 1 company that is part owned which is accounted for using equity method.
I am confident in how to treat the intercompany transactions between the wholly owned subs but I am a little unsure whether intercompany transactions between the part owned company & the wholly owned subs (both revenue & expenses) should be eliminated in the consolidated income statement or are they treated as 3rd party & not eliminated.
I know I should know this but I have not dealt with this particular situation before & any guidance would be greatly. appreciated.
Thanks in advance
Replies (4)
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Look at it this way. Would your consolidation balance if you were to eliminate the group’s transactions with the company that is to be equity accounted?
If you're equity accounting for your 30% owned company any transactions/balances with it are not eliminated on consolidation.
Yes you only eliminate intra group transactions from the date from which you are consolidating the results of the new subsidiary.