Is there such thing as Unrealized gain/loss in Subsidiary? Any example would help. Thanks
I’m not a CA, but I think the answer is no. Unrealized gain/loss is a mark-to-market concept and is applied to the valuation of marketable securities, not subsidiary businesses as subs are accounted for using some form of consolidation, depending on the level of ownership and control the parent has.
I think the Unrealized gain/loss in Subsidiary concept is used in financial services industry!! Not sure. Guess this question goes unanswered. Oh well! Too bad.
As far as I know, there is something called Unrealised profit on stocks in consolidation. When the parent sells goods to the subsidiary in a normal arms length trading transaction, and In case the subsidiary is not able to sell those goods by the end of the financial year, the stock remaining should be valued at cost after removing the profit component from them(since it is unrealised), before consolidating the same with the parents books. So from an accounting standpoint, unrealised profit on stock will be reduced from the balance sheet and the income statement. Hope my explanation helps !
Thanks for the effort Nimita. Appreciate it =)