Summary Group Statements Volume 1 Chapter 5

Chapter 5
Intragroup
Intragroup Balances

 All intragroup A, L, E must be eliminated
 Ensures assets and liabilities are not overstated

Loan between Parent and Sub

Dr Loan Liability

Cr Loan Asset

Dr Other Income

Cr Finance Costs

Elimination of transaction costs at acquisition

 Costs constitute incremental costs as they would not have occurred had the
transaction itself not occurred
 IFRS 3 says such costs must be expensed, if sub valued at FV p/l no problem
 Valuing costs can be capitalised
 If sub is FV oci then reverse capitalised costs
 Must be done every year
 Dr Trans costs Cr Investment in Sub

Bank Overdrafts and Guarantees

 Pos balance of one entity can only be set off against balance of other if:
 Acc at same bank
 Bank will do set off in reality
 Group will settle on net basis
 Guarantees or contingencies to other member of group falls away on
consolidation

Intragroup Sales

 Profit on such sales can only be realised when the asset is sold to an external
3rd party
 Profits and losses resulting from such sales must be eliminated in full
 Unrealised profits must be reversed

Unrealised profit closing stock