RSM321H1 Chapter Notes - Chapter 6: Production Function, Inventory Turnover, Deferred Tax

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RSM 321: Textbook Notes
Chapter 6: Intercompany Inventory and Land Profits
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o%!
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!
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!&!8-&/
Parent$ XXX
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Less:Unrealized aftertax profit $ XXX
Less:Am ortization/Impair . of AD $ XXX
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Attributable ¿:
Shareholders of parent $ XXX
NCI (O PASNI)$ XXX
Parent $ XXX
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¿@acquisition $ XXX
Increase since acquisition $ XXX
Less:Unrealized aftertax profit $ XXX
Less:Amortization/Impair . of AD $ XXX
Adjusted increase$ XXX
Parent'sOP OP $ XXX
CRE $ XXX
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$ XXX
Add :Unamortized AD $ XXX
Less:Unrealized intercompany aftertax profits $ XXX
AdjustedSE $ XXX
NCI OP %OP
NCI $ XXX
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&
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(&!:;'3944/
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:;'!
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:;'2

:!
.
%
+
%+!

-((&+
/
o0 3>
 3>
-(.)
/
o0 3>
 3>
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Document Summary

All intercompany transactions between a parent and a subsidiary are eliminated so that the final consolidated statements reflect only the result of transactions with entities outside the group. Intercompany transactions are sometimes used to shift income from one jurisdiction to another to minimize or avoid paying taxes: federal legislation in canada has prevented companies from using tax havens in order to avoid paying taxes. Since consolidated ni attributable to the parent and nci"s are only allocations of the entity"s ni, they don"t change either. Where a loan is made to the subsidiary by the parent (or vice-versa), the elimination of the receivable/payable on the consolidated balance sheet would not change the amounts of the two equities (nci and ci). Parent companies often charge yearly management fees to subsidiaries as a means of allocating head office costs to all the companies within the group: these fees must be eliminated upon consolidation.

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