The following important notes are made during this chapter:
- Only the transactions made between the parent and the subsidiary must be eliminated via a journal entry.
- Transactions between the parent and other entities or the subsidiary and other entries are not classified as intra-group and should not be eliminated.
- Only intragroup transactions must be eliminated between the parent and subsidiary that do not affect profit or loss.
Elimination of possible intra-group transactions:
Dividends
Only declared, not paid:
Dr | Cr | |
Other income (P) (SCI) | x | |
Non-Controlling Interest (SCE) | x | |
Dividends declared (S) (SCE) | X |
Dr | Cr | |
Shareholders fo dividends (S)(SFP) | x | |
Dividends receivable (P) (SFP) | x |
Declared AND paid
Dr | Cr | |
Other income (P) (SCI) | x | |
Non-Controlling Interest (SCE) | x | |
Dividends declared/paid (S) (SCE) | X |
Rent
Dr | Cr | |
Other Income/ Rent Income (Lessor P or S) (SCI) | x | |
Other Expenses/ Rent expense (Lessee P or S) (SCI) | x |
Loans
Dr | Cr | |
Finance income (Lender P or S) (SCI) | x | |
Finance Cost (Borrower P or S) (SCI) | x | |
Loans due (Borrower P or S) (SFP) | x | |
Loans granted (Borrower P or S) (SFP) | x |
Management/ Administration fees
Dr | Cr | |
Other Income/ Management fees received (Service provider P or S) (SCI) | x | |
Other Expenses/ Management fees paid (Service receiver P or S) (SCI) | x |
Other intra-group transactions and balances that must be eliminated are the followings that are explained in further chapters:
- Sales of inventories
- Debtors and creditors
- Property, plant and equipment