Summary
Summary Group Statements Volume 1 Chapter 5
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An introduction to Group Statements and group companies
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Chapter 5Intragroup
Intragroup Balances
All intragroup A, L, E must be eliminated
Ensures assets and liabilities are not overstated
Loan between Parent and Sub
Dr Loan Liability
Cr Loan Asset
Dr Other Income
Cr Finance Costs
Elimination of transaction costs at acquisition
Costs constitute incremental costs as they would not have occurred had the
transaction itself not occurred
IFRS 3 says such costs must be expensed, if sub valued at FV p/l no problem
Valuing costs can be capitalised
If sub is FV oci then reverse capitalised costs
Must be done every year
Dr Trans costs Cr Investment in Sub
Bank Overdrafts and Guarantees
Pos balance of one entity can only be set off against balance of other if:
Acc at same bank
Bank will do set off in reality
Group will settle on net basis
Guarantees or contingencies to other member of group falls away on
consolidation
Intragroup Sales
Profit on such sales can only be realised when the asset is sold to an external
3rd party
Profits and losses resulting from such sales must be eliminated in full
Unrealised profits must be reversed
Unrealised profit closing stock
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