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Group statements Chapter 6 Notes
Financial accounting 300 (University of Pretoria)
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Group statements Chapter 6
Intragroup PPE: Basic principles
If there are intragroup sales of PPE for a profit within the group
c Unrealised profit eliminated in full upon consolidation (IFRS 10.B86(c))
Non-depreciable PPE
Consolidation journal:
Dr Profit on sale of PPE (P/L) (â profit)
Cr PPE: cost (SFP) (â CP)
When will unrealised profit realise?
c When PPE sold to a 3rd party
c Therefore, unrealised profit is eliminated every year upon consolidation until sold to
a 3rd party
o Deferred tax implications
In the consolidated FS, unrealised profits are eliminated/realised
c Consolidated profit before tax changes
c Therefore, consolidated income tax expense must also be adjusted
Non-depreciable PPE:
Eliminate unrealised profit fully in year of the intragroup sale decrease profit for the
group decrease income tax expense for the group
Consolidation journal:
Dr Deferred tax (SFP)
Cr Income tax expense (P/L)
*we are deferring the tax until the profit realises
o Sale to 3 rd party in same reporting period
c Adding the TBs of P and S has the effect that both “profit on sale of PPE” and
“property, plant and equipment” are shown at the correct amount
c No consolidation journals are thus required
o Sale to 3 rd party in different reporting periods
Downloaded by Lexi Claasen ()
Group statements Chapter 6 Notes
Financial accounting 300 (University of Pretoria)
StuDocu is not sponsored or endorsed by any college or university
Downloaded by Lexi Claasen ()
, lOMoARcPSD|8949379
Group statements Chapter 6
Intragroup PPE: Basic principles
If there are intragroup sales of PPE for a profit within the group
c Unrealised profit eliminated in full upon consolidation (IFRS 10.B86(c))
Non-depreciable PPE
Consolidation journal:
Dr Profit on sale of PPE (P/L) (â profit)
Cr PPE: cost (SFP) (â CP)
When will unrealised profit realise?
c When PPE sold to a 3rd party
c Therefore, unrealised profit is eliminated every year upon consolidation until sold to
a 3rd party
o Deferred tax implications
In the consolidated FS, unrealised profits are eliminated/realised
c Consolidated profit before tax changes
c Therefore, consolidated income tax expense must also be adjusted
Non-depreciable PPE:
Eliminate unrealised profit fully in year of the intragroup sale decrease profit for the
group decrease income tax expense for the group
Consolidation journal:
Dr Deferred tax (SFP)
Cr Income tax expense (P/L)
*we are deferring the tax until the profit realises
o Sale to 3 rd party in same reporting period
c Adding the TBs of P and S has the effect that both “profit on sale of PPE” and
“property, plant and equipment” are shown at the correct amount
c No consolidation journals are thus required
o Sale to 3 rd party in different reporting periods
Downloaded by Lexi Claasen ()
