BKAF3073 Chapter 2

CONSOLIDATION SUBSEQUENT
TO THE DATE OF ACQUISITION
Learning Objectives
To differentiate between pre-acquisitions and postacquisitions reserves
To determine the unrealised profits for inter-company
To treat the goodwill on consolidation after initial
recognition
To prepare consolidation journal entries and related
adjustment and elimination
To prepare consolidation worksheet
To prepare consolidation statement of comprehensive
income and statement of financial position
PRE-ACQUISITION RESERVES
The reserves existing in the subsidiary
on the date of acquisition
Non-distributable reserves by the
parent
Eliminated in consolidation (against
COI)
POST-ACQUISITION RESERVES
Increase @ decrease in reserves after
acquisition
Profit made by subsidiary after
acquisition post acquisition profit
Include in consolidated reserves
Consolidation Procedures:
1.
2.
3.
4.
5.
The carrying amount of the parents investment in the

subsidiary & the parents share of the equity of the
subsidiary are eliminated
Eliminate Intra-group (intercompany) balances &
transactions
Eliminate Unrealised profits from intra-group transactions
The NCI in current year profit & the net asset of the
subsidiary
The Statement of Comprehensive Income & Statement
of Financial Position of the parent & subsidiary are
combined line-by-line
Example 1
Sab Bhd acquired 100% of the issued share
capital of Cha Bhd on the 30 June 2000 for a
total consideration of RM120,000.
At that date, Cha Bhds net assets at fair value
was represented by share capital of
RM100,000 and retained profit of RM20,000.
The statement of financial position of Sab and
Cha as at 30 June 2001 are as follows.
Statement of financial position of Sab and Cha as at 30 June 2001
Land
Investment in Cha
Debtors
Bank
Long term Loan
Creditors
Share Capital
Retained profit
SAB BHD
(RM)
400,000
120,000
230,000
50,000
(100,000)
700,000
500,000
200,000
700,000
CHA BHD
(RM)
150,000
50,000
30,000
(50,000)
(30,000)
150,000
100,000
50,000
150,000
Required:
1. Determine the pre acquisition and post-acquisition
reserves as at 30 June 2001.
2. Prepare the consolidated worksheet as at 30 June
2001
Answer
1) Pre-acquisition = 100% x 20,000
= 20,000
Post-acquisition = 100% x (50,000 - 20,000)
= 30,000
2) Consolidation journal entry

Dr Share capital
100,000
Dr Retained profit
20,000
Cr Investment in Cha
120,000
(to eliminate COI)
SAB
CHA
Adjustment Consol.
RM000 RM000 DR CR Balance
Land
Inv in CHA
Debtors
Bank
Long term
loan
Creditors
Share Capital
Retained
profit
400
120
230
50
150
50
30
(50)
(100)
700
500
200
(30)
150
100
50
700
150
120
100
20
550
280
80
(50)
(130)
730
500
230
730
PRE-ACQUISITION AND POST-ACQUISITION

FOR NON-CONTROLLING INTEREST
Pre-acquisition
- eliminated when recording the NCI in SFP
Post-acquisition
- need to proportionate based on NCI %
- included in the consol. SCI under NCI a/c
- Calculation: % of NCI x Profit After Tax of subsidiary
- Assume no inter company transaction:
Dr. Non-Controlling Interest ( SCI)
RMXX
Cr. Non-Controlling Interest (SFP)
RMXX
(to record NCI for share of profit for the year)
Example 2:
On 31 Dec 2002, WWW Bhd acquired 80% interest in
RRR Bhd at purchase consideration of RM32,000. At the
date of acquisition, net asset of RRR Bhd represented by
equity is as follows:
Share Capital
20,000
Retained Earning
Revaluation reserve
10,000
10,000
Financial statement for both companies on 31/12/2003

are as follows:
Statement of Financial Position as at 31/12/2003

WWW Bhd
(RM000)
RRR Bhd
(RM000)
Share Capital
50,000
20,000
Revaluation reserve
50,000
15,000
Retained Earning
60,000
35,000
Liability
22,000
50,000
182,000
120,000
32,000
150,000
120,000
182,000
120,000
Investment in RRR Bhd

Other assets
Statement of Comprehensive Income FYE

31/12/2003
WWW Bhd
(RM000)
RRR Bhd
(RM000)
40,000
40,000
(20,000)
(15,000)
Profit for the period
20,000
25,000
Retained earning 1/1/2003
40,000
10,000
60,000
35,000
Profit before tax

Tax
Dividend
Retained earning
31/12/2003
Additional information:
No intra company transactions occur during the period.
Suggested answer:
Consolidation journal entries:
To eliminate investment in subsidiary
Dr Share capital (80% x 20,000)
16,000
Dr Rev. reserve (80% x 10,000)
8,000
Dr Retained Earning (80%x10,000) 8,000
Cr Investment in RRR Bhd
32,000
Suggested answer:
To record NCI in current year profit
Dr NCI (20% x 25,000) (SCI)
5,000
Cr NCI (SFP)
5,000
To record NCI in subsidiarys net assets
Dr Share capital (20% x 20,000) 4,000
Dr Rev reserve (20% x 15,000) 3,000
Dr R Earning (20% x 10,000)
2,000
Cr NCI (SFP)
9,000
Consolidated Worksheet
WWW
Bhd
Income Statement
Profit before tax
Tax
Profit for the period
RRR
Bhd
Adj.
40,000 40,000
(20,000) (15,000)
20,000
80,000
(35,000)
25,000
Attributable to:
Equity holders of the parent
NCI
*25,000 x 0.8 = 20000 + 20,000
Consol.
Balance
45,000
b)5,000
*40,000
5,000
WWW
Bhd
Balance Sheet:
Investment in RRR
Bhd
Other assets
RRR
Bhd
Adjustment and
elimination
32,000
150,000
120,000
Equity and liabilities

Equity attributable to equitys holders of the parent:
Share Capital
50,000
20,000
a)16,000
c)4,000
Revaluation reserve
50,000
15,000
a)8,000
c)3,000
Retained Earning
60,000
35,000
a)8,000
b)5,000
c)2,000
NCI
Liability
22,000
50,000
a)32,000
Consol.
Balance
270,000
270,000
50,000
54,000
80,000
b)5,000
c)9,000
14,000
72,000
270,000
INTER-COMPANY TRANSACTIONS
Parents & its subsidiary may trade within the group.
Group viewpoint - all the inter-company transaction
have to be eliminated, as the group is a single entity.
Logically, the group cant possibly trade/ make
profits from themselves.
Any inter company transactions will be eliminated
when the consolidated financial statements are
prepared.
the group must represent as a single entity.
can avoid double counting the assets, liabilities,
revenue & expenses.
removing gains and losses recognized
MFRS127: Inter company balances and intercompany transactions and resulting unrealised
profits (URP) should be eliminated in full. Intragroup
losses may indicate an impairment that requires
recognition in the consolidated financial statements.
(para 20-21)
Noted that the eliminations of the transactions are
only for the purpose of preparing consolidated
financial statements. Thus, it will not effect on the
parent and subsidiary books.
1. Intra-group Sale of trading inventories
2. Intra-group Sale of fixed assets
3. Intra-group Dividends
4. Other Intra-group transactions
Inter Company Sales Of Inventories

The sales of inventory can be transferred either at cost prices
or at selling / transfer / invoice prices.
When the inventory are transferred at cost price, no inter
company profits or losses can possibly arise as the
inventories only been transferred from one location (seller) to
another location (buyer) within the group as a single entity.
Inventory are transferred at selling prices or above the cost
price.
Unrealised profit exists?
2 situations:
The buyer managed to sell all the inventories during the
year no URP.
The buyer still hold an amount in their inventories
eliminate URP

Calculation for unrealized profit in ending inventories:
based on % of profit that has been defined.
Inventories transferred above cost: 20% on cost
Cost + Profit
= Sales
100% + 20%= 120%
URP = 20/120 x Inter company ending inventories
Inventories transferred at selling price (sp): 20% on sp
Cost + Profit = Sales
80% + 20% = 100%
URP = 20/100 x Inter company ending inventories
Inter Company Sales of Inventories

Example 3:
CD acquired AB in 2000 with 80% interest.
During financial year 2002, AB sold inventories to CD
at transfer prices, 120% on sales, amounted to
RM20,000. At year end, RM5,000 remained in CDs
ending inventories.
For year 2003, intragroup sales was RM30,000 and
RM4,000 remained in CDs ending inventories.
Assume income tax rate is 30%.
Required: Record the necessary journal entries for
2002
Inter Company Sales of Inventories

Solution:
2002
Eliminate inter-company sales during the year 2002:
DR Sales
20,000
CRPurchase/COGS
20,000
Eliminate URP for the year @ carried forward:
DR Ending Inventories (SCI)/COGS 1,000
CREnding Inventories (SFP)
1,000

Solution:
2003
Eliminate inter-company sales during the year:
DR Sales
30,000
CR Purchases/COGS
30,000
Reinstate unrealised profit brought forward:
Dr. Retained profit b/f
1,000
Cr.Beginning Inventories (SCI)/COGS
1,000
Eliminate URP for the year @ carried forward:
DR Ending Inventories (SCI)/COGS 800
CR Ending Inventories (SFP) 800
Tax Effect on URP

Example :
Refer to Example 3 (slide 25) sale of inventories
Solution:
2002
DR
Sales
20,000
CR Purchase /COGS
20,000
(To eliminate inter-company sales during the year 2002)
DREnding Inventories (SCI)/COGS 1,000
CR Ending Inventories (SFP)
1,000
(To eliminate URP for the year @ carried forward)
DR Deferred tax (SFP)
300
(1,000 x 30%)
CR Tax exp (SCI)
300
(To account for tax effect of the profit deferred)
Solution:
2003
DR
Sales
30,000
CR Purchases/COGS
30,000
(To eliminate inter-company sales during the year 2002)
Dr. Retained profit b/f
700
Dr. Tax Expense
300
Cr. Beginning Inventories (SCI)/COGS 1,000
(To reinstate unrealised profit brought forward)
DR Ending Inventories (SCI) /COGS 800
CR Ending Inventories (SFP)
800
(To eliminate URP for the year @ carried forward)
DR DR Deferred tax (SFP)
240
CR Tax exp (SCI)
240
(To account for tax effect of the profit deferred)
Upstream sales & Downstream sales

Inter-company sales of inventories can
either be upstream or downstream.
Upstream - subsidiary sold the inventories
to parent.
Downstream - parent sold the inventories
to subsidiary.
It is important to determine the relationship,
as the accounting treatment is different.
Upstream sales
The profits from the inter-company sales will
be recorded by the subsidiary, as the
subsidiary is a selling company.
Thus, when the full unrealised profits are
eliminated, the share of profits for noncontrolling interest must be allocated based
on the percentage in the subsidiary.
Upstream sales
The non-controlling interests share of profits or to

record NCI in SCI:
NCI % holding in
the selling
subsidiary
Subsidiarys profit after tax

(+) Unrealised profit brought fw
() Unrealised profit carried fw
To record NCI in SFP:

NCI % holding in
the selling
subsidiary
Subsidiarys Retained Profit b/f

() Unrealised profit brought fw
Upstream sales
Example 4:
Based on Example 3, assume the transactions during

year 2003 were as follows:
Profit after tax of AB = RM60,000
Retained profits b/f of AB = RM120,000
Sales to CD = RM30,000
Ending inventories in CD = RM4,000
Calculate the share of NCI for URP in SCI and SFP.
Upstream sales
Solution:
Step 1: Determine the URP c/f = 20/100 x 4,000
= 800
Step 2: Determine the URP b/f = 20/100 x 5,000
= 1,000
NCI in SCI = 20% x (60,000 +1,000 - 800)
= 12,040
NCI in SFP = 20% x (120,000 -1,000)
= 23,800
Downstream sales
The parent will record the profits from the intercompany sales, as the parent is a selling
company.
Thus, when the full unrealised profits are eliminated,
the share of profits for non-controlling interest will
not be affected
MFRS 127 Para 19 stated that in allocating the

groups profit and net assets to non-controlling
interests based on their respective interests in
the subsidiaries that have recorded the
unrealised profits or losses.
Inter company sale or transfer of

Fixed Assets Depreciable
Eliminate the unrealised profits and reduce the asset account to
its original book value at the date of inter-company transfer or
sale.
Eliminate the difference between the annual depreciation
expenses recorded by the purchasing company and the amount
based on original acquisition cost recorded by the selling
company before transfer.
Restate the balances in the assets and accumulated depreciation
accounts so that the amount based on the original cost.
After the sale, the purchasing company will calculate depreciation
on the basis of its purchased price.
Recorded depreciation must be corrected on consolidation
Downstream transfer/sale vs upstream transfer

Modifications are required in the calculation of NCI:
In the year of sale/transfer:
NCIs %
holding

() full unrealised profits
(+) Depreciation adjustment
In subsequent years and over remaining useful life:

NCIs %
holding

(+) Depreciation adjustment

Example 5:
AB Bhd acquired a 60% interest in XY Bhd on 1 January
2000. On 20 March 2002, AB Bhd sold a machinery to XY
Bhd for RM800,000. The machinery was bought by AB Bhd
on 1 January 1997 at cost of RM1,200,000 and
accumulated depreciation on 20 March 2002 was
RM600,000.
The group policy is to depreciate this type of machinery on
a straight line basis over period of 5 years and to provide a
full years depreciation if the machinery has been used for
more than 6 months in the year. Ignored the tax effect.
REQUIRED: Prepare the consolidation journal for 2002
until 2007.

Solution:
Calculate profits on sales of fixed assets:
RM
Sales prices
800,000
Book Value
(600,000) [1,200 - 600]
Profit on sale
200,000
Calculate depreciation expenses
Book Value
Depreciation
Companys viewpoint
(XY Bhd) RM
Groups viewpoint
RM
800,000
800,000/5
=160,000
600,000
600,000/5
=120,000

Solution (cont):
Differences on depreciation expenses of RM40,000 (160-120)
Adjustments in consolidated accounts are needed as the depreciation
expenses are overstated.
Year 2002
DR Profit on sales of FA 200,000
CR Fixed asset 200,000
(To eliminate the URP and restate the assets at original cost)
DR Accumulated depreciation 40,000
CR Depreciation expenses 40,000
(To correct for depreciation over provided)

Solution (cont):
Year 2003
DR Retained profit brought forward 160,000
DR Accumulated depreciation
40,000
CRFixed assets
200,000
(To restate opening balances relating to sale of fixed assets)
DR
Accumulated depreciation
40,000
CRDepreciation expenses
40,000

Solution (cont):
Year 2004
DR Retained profit b/f
120,000
80,000
CRFixed assets
200,000
(To restate opening balances relating to sale of FA)
DR
40,000
40,000
Inter company sale or transfer of Fixed

Assets Depreciable
Solution (cont):
Year 2005
80,000
120,000
CRFixed assets
200,000
DR
40,000
40,000

Assets Depreciable
Solution (cont):
Year 2006
40,000
160,000
CRFixed assets
200,000
DR
40,000
40,000

Assets Depreciable
Solution(cont):
Year 2007
200,000
CRFixed assets
200,000
Noted: If the fixed assets continue to be used. This is because
the machinery is fully depreciated and the unrealised profits
been fully realised in the year 2006.
b) Assume that on 1 January 2006, AB Bhd sold the
machinery to outside party for RM500,000.
Required: Record the necessary journal entries.

Assets Depreciable
Solution:
Calculate the profits on sale of fixed assets
Companys viewpoint
(XY Bhd)
RM
Groups viewpoint
RM
Sales prices
500,000
500,000
Book Value
160,000
120,000
[800 (800/5) x 4]
[600 (600/5) x 4]
340,000
380,000
Profit on sale

Assets Depreciable
Solution:
From groups viewpoint, the profits on sales of machinery is
RM380,000 as it is recorded at original book value of
RM600,000. The differences between profits on sale of fixed
assets by companys viewpoint and groups viewpoint need
to be adjusted. The journal entry would be:
DRRetained profits brought forward
40,000
CRProfits on sale of fixed assets
40,000
(To record realisation of unrealised inter-company profits on
fixed assets)
The journal entry shows that the profits on sale of fixed
assets balances in the group account will be increased to
RM380,000.

Assets :Non-depreciable assets
Example 6:
AB Bhd acquired a 60% interest in XY Bhd in

1 January 2000. On 20 March 2002, XY Bhd
sold a piece of land AB Bhd for RM1,800,000.
The land was bought by XY Bhd in 1 January
1998 at cost RM1,000,000. AB Bhd held the
land until 31 December 2004 when it was
sold to outside party for RM2,000,000.
Required: Prepare the consolidation journal
entry for the years 2002, 2003 and 2004.

Assets:Non-depreciable assets
Solution:
Year 2002
DR Profits on sale of land 800,000
CRLand 800,000
(To eliminate the unrealised profits and restate the land at original
cost)
[1,800 1,000]
Year 2003
DR Retained profits b/f 800,000
CRLand 800,000
(To eliminate the unrealised profits and restate the land at original
cost)
Solution (cont..):
Year 2004
Calculate the profits on sale of land
Groups viewpoint
RM
Sales prices
Companys viewpoint
(XY Bhd)
RM
2,000,000
Book Value
1,800,000
1,000,000
200,000
1,000,000
Profit on sale
DR Retained profits b/f 800,000

CRProfits on sale of land 800,000
(To record realisation of the unrealised profits)
2,000,000
Tax Effect on URP

If adjustment on URP has tax effect, deferred tax assets or
liability should be recognized (MFRS 112)
For example- sale of asset
Additional consolidation adjustment
Year 1:
Dr. Deferred Tax
xx
Cr. Tax expense
xx
Year 2:
Dr. Deferred Tax
xx
Cr. Beginning Retained Profit
Dr. Tax expense
Cr. Deferred Tax
xx
xx
xx
Tax Effect on URP

Example A:
Refer to Example 6 (slide 14) sale of non-depreciable assets
Solution
Year 2002
DR Profits on sale of land
800,000
CR Land
800,000
(To eliminate the unrealised profits and restate the land at
original cost)
DR Deferred tax (BS)
240,000
CR Tax exp
240,000
(To account for the related tax effect of the elimination of URP)
(800,000 x 30%)
Solution (cont):
Year 2003
DR
Retained profits b/f
560,000
DR
Deferred tax (b/s)
240,000 (800,000 x 30%)
CR Land
800,000
(To eliminate the unrealised profits and restate the land at original cost)
Year 2004
DR
560,000
DR Deferred tax (b/s)
240,000 (800,000 x 30%)
CR Profits on sale of land
800,000
(To record realisation of the unrealised profits)
DRTax exp
240,000 (800,000 x 30%)
CR Deferred tax (b/s)
240,000
(To account for the reversal of tax effect of the elimination of URP)
Tax Effect on URP

Example B
Refer Example 5 (slide 4) - sale of depreciable assets
Year 2002
DR
Profit on sales of FA
200,000
CR Fixed asset
200,000
(To eliminate the URP and restate the assets at original cost)
DR
Deferred tax (b/s)

60,000
(200,000 x 30%)
CR Tax exp
60,000
(To account for the related tax effect of the elimination of URP)
Tax Effect on URP(cont)

Solution (cont)
DR
40,000
40,000
DR
Tax exp (40,000 x 30%)

12,000
CRDeferred tax (b/s)
12,000
(To account for the reversal of tax effect of the elimination
of URP)
Solution (cont)
Year 2003
DR Retained profit brought forward
112,000
48,000
(160,000 x 30%)
40,000
CR Fixed assets
200,000
40,000
CR Depreciation expenses
40,000
DRTax exp (40,000 x 30%)
12,000
12,000
Solution (cont)
Year 2004
84,000
36,000
(120,000 x 30%)
80,000
CR Fixed assets
200,000
(To restate opening balances relating to sale of FA)
40,000
40,000
DRTax exp (40,000 x 30%)
12,000
12,000
Solution (cont)
Year 2005
DR
Retained profit b/f
56,000
24,000
(80,000 x 30%)
DR
Accumulated depreciation 120,000
CR Fixed assets
200,000
DR

40,000
DRTax exp (40,000 x 30%) 12,000
CR Deferred tax (b/s) 12,000
Solution (cont)
Year 2006
28,000
12,000
(40,000 x 30%)
160,000
CR Fixed assets
200,000
40,000
40,000
DRTax exp (40,000 x 30%)
12,000
12,000
Solution (cont)
Year 2007
DR
CR Fixed assets
200,000
b) If 1 January 2006, AB Bhd sold the machinery to outside party
for RM500,000.
DR
DR
DR

28,000
Deferred tax (b/s) (40,000 x 30%) 12,000
CR Profits on sale of fixed assets
40,000
(To record realisation of unrealised inter-company profits on fixed
assets)
Tax exp (40,000 x 30%)

12,000
12,000
Inter-company Dividends
Dividends paid/payable by a subsidiary are received /receivable
by its parent.
Group viewpoint - no change in the groups profit
- shifting of profit from one location to another location
On consolidation, dividend income received/receivable by the
parent should be eliminated against dividends paid/declared by
subsidiaries in the consolidated SCI
In Malaysia, the paying company paid the dividend at net of tax
and the receiving company recorded the dividend income at
gross amount (before tax).
The inter-company dividend must be eliminated in full and the
proportion of non-controlling interest need to be allocated.
Thus, the elimination journal entries will depend on whether the
dividend is already been recorded or not.
Subsidiary can either paid dividend using pre-acquisition
reserves or post-acquisition reserves.
When subsidiary paid dividend from pre-acquisition reserves,
the dividend received by the parent should be regarded as a
return of the capital invested and will be adjusted against the
cost of investment (reduction). This happened at the time
when parent acquired subsidiary and shortly after, the
subsidiary paid the dividend.
In parents books, the journal entry would be:
DR Cash or dividend receivable
CR Cost of investment
(To record dividend received from subsidiary paid using preacquisition reserves)
Example 7:
AB Bhd acquired a 60% interest in XY Bhd in 1 January 2000 for
a cash consideration of RM160,000. The net assets of XY Bhd at
that date were represented by share capital of RM100,000 and
retained profits of RM80,000.
During the year 2002, XY Bhd paid a dividend of RM140,000 (net
of tax) and AB Bhd recorded as dividend income in the statement
of comprehensive income. XY BHd also made a proposed
dividend of RM60,000 recorded in statement of financial position
and AB Bhd recorded as dividend receivable in the statement of
financial position. Corporate rate tax for 2002 is 30%.
Required:
Record the eliminations journal entries for inter-company
dividend.
Solution:
DR Dividend income
120,000 [(140,000/.7) x 60%]
CR
Tax expenses
36,000 (120,000 x 30%)
CR Dividend paid
84,000 (120,000/.7)
(To eliminate inter-company dividend in the profit and loss account)
DR Non-controlling interest (b/s) 56,000
(140,000/.7 x 40%x70)
CR Dividend paid
56,000
(To allocate inter-company dividend paid for non-controlling interest)
Parent and subsidiary recorded the dividend in the SFP.
DR Dividend proposed
60,000
CR Dividend receivable
36,000 (60,000x60%)
CR Other creditors (NCI)
24,000 (60,000 x 40%)
(To eliminate inter-company dividend in balance sheet and allocate to noncontrolling interest)
Other inter-company transactions

Inter-company loans that give rise to interest income and
interest expense
Management fees charged by the parent company
the effects of all such inter-company transactions in a
group must be eliminated
Other inter-company transactions

Journal entries
To eliminate inter-company loan balances:
DR Loan from Parent or Subsidiary

CRLoan to Parent or Subsidiary
To eliminate inter-company balances:
DR
CR
xx
xx
Account payables
Account receivables
xx
xx
To eliminate inter-company for management fees, rental and

interest:
DR Management or rental or interest received
xx
CR Management or rental or interest paid
xx
Other Consolidation Adjustments

Impairment of Goodwill on Consolidation
Goodwill on consolidation subject on impairment test
Illustrative Example 3.21 (pg 136)
Accounting for Unamortized Negative Goodwill

Transitional provision- derecognized against beginning retained
earning.
Adjustment fir Depreciation on Revalued Assets

If subsidiary did not adjusted its book for the revaluation,
additional consolidation journal entry is required.
End of the Chapter

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BKAF3073 Chapter 2

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CONSOLIDATION SUBSEQUENT

TO THE DATE OF ACQUISITION

The carrying amount of the parents investment in the

Statement of financial position of Sab and Cha as at 30 June 2001

2) Consolidation journal entry

PRE-ACQUISITION AND POST-ACQUISITION

Financial statement for both companies on 31/12/2003

Statement of Financial Position as at 31/12/2003

Investment in RRR Bhd

Statement of Comprehensive Income FYE

Profit for the period

Retained earning 1/1/2003

Profit before tax

Equity and liabilities

Inter Company Sales Of Inventories

Inter Company Sales Of Inventories

Inter Company Sales of Inventories

Inter Company Sales of Inventories

Inter Company Sales Of Inventories

Tax Effect on URP

Upstream sales & Downstream sales

The non-controlling interests share of profits or to

Subsidiarys profit after tax

To record NCI in SFP:

Subsidiarys Retained Profit b/f

Based on Example 3, assume the transactions during

MFRS 127 Para 19 stated that in allocating the

Inter company sale or transfer of

Inter company sale or transfer of

Subsidiarys profit after tax

In subsequent years and over remaining useful life:

Subsidiarys profit after tax

Inter company sale or transfer of

Inter company sale or transfer of

Inter company sale or transfer of

Inter company sale or transfer of

Inter company sale or transfer of

Inter company sale or transfer of Fixed

Inter company sale or transfer of Fixed

Inter company sale or transfer of Fixed

Inter company sale or transfer of Fixed

Inter company sale or transfer of Fixed

Inter company sale or transfer of Fixed

AB Bhd acquired a 60% interest in XY Bhd in

Inter company sale or transfer of Fixed

DR Retained profits b/f 800,000

Tax Effect on URP

Tax Effect on URP

Tax Effect on URP

Deferred tax (b/s)

Tax Effect on URP(cont)

Tax exp (40,000 x 30%)

Accumulated depreciation 40,000

Retained profits b/f

Tax exp (40,000 x 30%)

Other inter-company transactions

Other inter-company transactions

To eliminate inter-company loan balances:

DR Loan from Parent or Subsidiary

To eliminate inter-company balances:

To eliminate inter-company for management fees, rental and

Other Consolidation Adjustments

Accounting for Unamortized Negative Goodwill

Adjustment fir Depreciation on Revalued Assets