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

 

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