Consolidations Chapter 4: Intra-group transactions

The following important notes are made during this chapter:

1. Only the transactions made between the parent and the subsidiary must be eliminated via a journal entry.
2. Transactions between the parent and other entities or the subsidiary and other entries are not classified as intra-group and should not be eliminated.
3. 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