Consolidated financial statements

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Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2012 Hi

Will someone please explain why should downstream and upstream sales be treated differently?

When the subsidiary sells goods to the holding company, the unrealized profit is adjusted against revenues and minority interest.

Whereas when the holding company sells goods to the subsidiary, the entire unrealized profit is adjusted against the revenues and not proportionately against minority interest.

Amol S Joglekar

Amol S Joglekar (Expert)

11 November 2012 Whose books we are writing is very important in either case. When Holding company sells the goods, the entire profit in the transaction is owned by the holding company. The minority of the subsidiary has very little role to play in the profit earned by the holding company in this particular transaction.

Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2012 When I sell to my 90% subsidiary an item with a profit of Rs.100, can not I say Rs.10 out of the Rs.100 is already realized even though the item remains unsold with the subsidiary as the 10% of the risk & reward of the item is already transferred to the minority owners?
In that case am I not justified adjusting only 90% against my reserves and IF AT ALL 100% is to be adjusted, 10% against minority interest?

Amol S Joglekar

Amol S Joglekar (Expert)

11 November 2012 Conservative principle.

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