Consolidation when parent i significant customer

What the rule when consolidating a subsidiary, but it says the parent is responsible for 40% of sales of sub? Thanks

digging deep here, but I think it’s something along the lines of having to back out the COGS related to the parent’s sales.

The consolidation will just be adding the A and L together, BUT intercompany stuff has to be removed. So if sales of the Parent are 1000 and the sub are 500 then the consolidation would yield: 1000+500-(500*.4) Then you would have to back out the minority interest. That would be my guess. I did miss the easiest question ever though, so you may want to tae this with a grain of salt.

Both COGS and Sales would be affected.

I think the “significant customer” is just trying to fool you to think there is more than the standard adjustment. You’ll just need to eliminate any intercompany stuff…the amounts will depend on who made what and who sold what to whom.

also if there are any intercompany receivables. that will be affected.

depends on two things 1 the procentage of ownership 2. the procentage attributable to intercompany transactions if you put a question we can disscus it together

mumukanda for sure you cant say you own yourself stuff… so you need to eliminate from AR what is attributable to you as a parent company

^^ yeah…did my response imply something else???

nope my post was one of approval :slight_smile:

alright then :wink:

He’s already answered your #1 & #2 question. He prefaced the question by saying it would be consolidating (so #1 is not necessary) and he answered #2 in his question. Unless you have other information (like parent still has the goods in inventory) you should take that value from the subs S & COGs before consolidating (if full consolidation simply combine your new subs values, or if prop consolidating than multiply this new subs value by your % ownership).