Question

Your Rating: 1 2 3 4 5 "Consolidated Financial Statements – Intra-Entity Asset Transactions" Please respond to the following: Per the textbook, no official FASB guidance exists on the assignment of income effects on non-controlling interest in the consolidation process, when either the parent transfers a depreciable asset to the subsidiary or vice versa. Suggest one (1) method of accounting for the income effects on the non-controlling interest that you consider most appropriate. Provide a rationale for your response. Assume that company P (parent) uses the equity method to account for its investment in company S (subsidiary). Company P purchases inventory items from company S. According to FASB’s guidance, the accountant must remove the inter-company profit from Company S’s net income. Determine if the process permanently eliminates the profit from the non-controlling interest or merely shifts the profit from one period to the next. Provide support for your rationale.

Answer 1

Answer:

No capability should be made between totally had and midway guaranteed components with respect to the necessity for the transfer of intercompany trades. In the two cases, all trades between the part associations of a joined assembling should be seen as inside trades and should be executed completely.

No compensation can be seen by the substances of a consolidated assembling until the point that it has been recognized in a trade with an outcast that is a get-together outside the blended assembling.

In this way, any unfamiliar intercompany advantage or mishap must be wiped out.

Since, non-controlling interest is a section of significant worth, trade of advantages between components in the blended assembling should be spoken to as internal trade.

Thus, no benefit should be seen until the point when the moment that they are recognized through an exchange trade with an outside social affair.