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INTER-COMPANY TRANSACTIONS AND BALANCESAs the associate company is not consolidated, care should be taken when there are trading transactions and inter-company balances between the investing company and associate company.
The following general approaches should apply:1) Inter-company sales of inventory and PPE should be ignored and not adjusted for.2) Incase of unrealized profit on PPE, opening and closing inventories and excess depreciation, then the investing company’s share of these items is not deducted from the group retained profits and also from the investment in associate company appearing in the balance sheet.
If the sale took place in the current year, then the Unrealised profit on PPE and on closing inventory and excess depreciation are deducted from the investing company share of profit before tax in associate company.However, if the sale took place in previous financial periods, then the UP on PPE, UP on opening inventory and excess depreciation are deducted from the group retained profits b/d.NOTE: The accounting treatment is the same irrespective of the company that made the sale.3) In the case of inter-company balances, the amount due to or from the associate company will still appear in the final balance sheet as they are not supposed to be cancelled out.However you may present the amounts due to or from associate company as a separate item from the other receivables or payables.
Calculating Present Value [LO1] An investment will pay you $43,000 in 10 years. If the appropriate discount rate is 7 percent compounded daily, what is the present value?
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