Intercompany transactions when 30% ownership

Setting up consolidation on IT system

Didn't find your answer?

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)

Please login or register to join the discussion.

By johngroganjga
21st Dec 2019 12:20

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?

Thanks (1)
avatar
By paul.benny
21st Dec 2019 12:21

If you're equity accounting for your 30% owned company any transactions/balances with it are not eliminated on consolidation.

Thanks (1)
avatar
By Outofpractice
21st Dec 2019 18:43

Loosing anonymity but that's ok. If the following year the parent then had control of company previously accounted under fair value would only transactions post control be eliminated in p&l or the full year? I've only ever dealt with 100% ownership from incorporation before & it's been a long time since I've studied consolidation. Also looking at this from an IT implementation stand point so don't have a more knowledgeable accountant/senior to ask

Thanks (0)
Replying to Outofpractice:
By johngroganjga
21st Dec 2019 21:49

Yes you only eliminate intra group transactions from the date from which you are consolidating the results of the new subsidiary.

Thanks (0)