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28 August 2008 2,089 views No Comment
Kindly if an entity is reporting to group of companies as subsidiary because the holding company own 49% of this company only so on the consolidation level we are consolidating the equity only , my question for the trade transactions between this entity and other group entities will be classified as Inter-company transaction or as trade creditors ( like any external supplier) ???
regards  

tony

As per IAS, under consolidation, inter company transactions and inter company profits are to be eliminated.

Best Regards

Hi all,

 
Yes, as normal inter-company only and eliminating transactions are at the holding level.
 
ThanksDear Hemant , 
I know that interco will be eliminated as per IFRS but my question is : since its associate because we own 49% and we are consolidating the profit only so will be considered as interco or others?

Tony  

Yes, as inter company only and not as other creditors, because in the consolidated financial statement of the holding company inter company balances will be knocked off which can not be possible in creditors.

Best Regards

Dear,

See extract IAS28, p22:

Profits and losses resulting from ‘upstream’ and ‘downstream’ transactions between an investor (including its consolidated subsidiaries) and an associate are recognised in the investor’s financial statements only to the extent of unrelated investors’ interests in the associate. ‘Upstream’ transactions are, for example, sales of assets from an associate to the investor. ‘Downstream’ transactions are, for example, sales of assets from the investor to an associate. The investor’s share in the associate’s profits and losses resulting from these transactions is eliminated.

All the best, Farah

Dear Farah 

I appreciate your reply , but it seems there is a bit confusion , i need answer very specific to this point ( if we are consolidating the associate entity on the Holding level only in the equity.   we are not consolidating the balance sheet we take our part of their profit and add it to the profit ) in this case do we have to detail the interco transaction??? and eliminate them ???? as we eliminate other Interco transactions?? 
do we have to consider their balances as Interco or other creditors or debtors??  

best regardsDear Tony

 

Please refer paragraph 29 of IAS 28 (2008). Perhaps that will answer your query.

RegardsDear All, 

In my understanding, it is require toeliminate pre-profit by adjusting profit in the closing stock.

Thanks,

 

Tony,
 
Will be classified as intercoy payables/receivables and a note will be added to show the related party transaction balances.
 
Best regards,
See IAS 28.22: the investor’s share in the associate’s profits and losses resulting from these transactions (note upstream and downstream transactions) is eliminated.
Kind regards/Met vriendelijke groet

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