Академический Документы
Профессиональный Документы
Культура Документы
FORMULAS
INTERCOMPANY TRANSACTIONS
1.) Consolidated Sales
Parent
Sabsidiary
Total
Less: Intercompany sales (Downstream sales + Upstream sales)
Consolidated Sales
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
(xxx)
xxx
xxx
xxx
Second Year
Parent
Subsidiary
Total
Intercompany sales (Downstream sales + Upstream sales)
Amortization of excess (inventory), if any
Realized gross profit in beginning inventory
Unrealized gross profit in ending inventory
Cosolidated cost of goods sold
xxx
xxx
xxx
(xxx)
xxx
(xxx)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
(xxx)
(xxx)
xxx
xxx
(xxx)
(xxx)
(xxx)
xxx
xxx
xxx
(xxx)
xxx
(xxx)
xxx
xxx
(xxx)
(xxx)
xxx
(xxx)
xxx
xxx
xxx
(xxx)
(xxx)
(xxx)
xxx
x%
xxx
Second Year
Subsidiary reported net income
+/- Amortization
Impairment loss, if any
Realized profit in begining inventory
Unrealized profit in ending inventory
Subsidiary adjusted net income
Multiply by: Controlling interest
Income from subsidiary
xxx
xxx
(xxx)
xxx
(xxx)
xxx
x%
xxx
Upstream s ales
xxx
(xxx)
(xxx)
xxx
xxx
xxx
Parent net income from own operation, exclusive of dividends income received from Subsidiary
Impairment loss, if any
Realized profit in begining inventory
Downstream s ales
Unrealized profit in ending inventory
Parent adjusted net income
Add: Income from subsidiary
Consolidated net income attributable to parent
xxx
(xxx)
xxx
(xxx)
xxx
xxx
xxx
7.) NCI in net income of Subsidiary/ Consolidated net income attributable to NCI
First Year
Subsidiary reported net income
+/- Amortization
Impairment loss, if any
Unrealized profit in ending inventory (Upstream sale)
Subsidiary adjusted net income
Multiply by: Noncontrolling interest
NCI in net income of Subsidiary/Consolidated net income attributable to NCI
xxx
(xxx)
(xxx)
(xxx)
xxx
x%
xxx
Second Year
Subsidiary reported net income
+/- Amortization
Impairment loss, if any
Realized profit in begining inventory
Unrealized profit in ending inventory
Subsidiary adjusted net income
Multiply by: Noncontrolling interest
NCI in net income of Subsidiary
xxx
xxx
(xxx)
xxx
(xxx)
xxx
x%
xxx
Upstream s ales
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Consolidated retained earnings formula if involves more the one previous year passed
Parent Reported Retained Earnings - January 1, current year
Less: Impairment loss - previous years if any
Unrealized profit in ending inventory - recent previous year
Parent Adjusted Retained Earnings - January 1, current year
Add: Undistributed Subsidiary adjusted net income in previous year/s
Subsidiary Retained Earnings - January 1 current year
Less: Subsidiary Retained Earnings - date of acquisition
Undistributed Subsidiary unadjusted net income
Less: Amortization ( cumulative amortization )
Impairment of goodwill - previous year if any
Unrealized profit in ending inventory - recent previous year
Undistributed Subsidiary adjusted net income
Less: NCI share in the income undistributed adjusted cumulative earnings
Consolidated Retained Earnings - January 1, current year
Add: Consolidated net income attributable to parent - current year #3
Total
Less: Dividends declared - parent only
Consolidated Retained Earnings - ending
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Previous Y ear/s
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Current Y ear
Note: You must noted the initial Noncontrolling interest amount on the date of acquisition. Because it is always your
beginning balance.
Computation of Noncontrolling interest more then one previous year passed
Noncontrolling interest - at the date of acquisition ( initial )
Add: NCI share in the income undistributed adjusted cumulative earnings
Subsidiary Retained Earnings - January 1 current year
Less: Subsidiary Retained Earnings - date of acquisition
Undistributed Subsidiary unadjusted cumulative earnings (net income )
Less: Amortization ( cumulative amortization )
Impairment of goodwill - previous year if any
Unrealized profit in ending inventory - recent previous year
Undistributed Subsidiary adjusted net income
Multiply by: Noncontrolling interest
Noncontrolling interest - January 1, current year
Add: NCI in net income of Subsidiary/Consolidated net income attributable to NCI
Total
Less: Dividends declared x Noncontrolling interest
Noncontrolling interest - December 31 current year
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Previous Y ear/s
xxx
xxx
x%
Note: Why we adjust Retained earnings and Noncontrolling interest beginning with the unrealized profit in ending inventory
recent previous year?
Because we corrected net income of the current year with the unrealized profit in ending inventory recent previous
year, which is now realized profit in beginning inventory for the current year.
See the computation of adjusted net incomes for Parent and Subsidairy, we included realized profit in
beginning inventory to get adjusted net income. Make this a constant procedure. Because, I agree there
is other way. How? Dont include realized profit in beginning in the computation of adjusted net income
and unrealized profit in ending recent previous year in adjusted retained earnings beginning to offset errors or
to counter balance. But again may I suggest to use the formula above constantly because it is seldom in
problem to have only Consolidated Retained Earnings as requirement normally consolidated net income is
also part of the requirement, with that you must included realized profit in beginning inventory.
xxx
xxx
xxx
xxx
xxx
xxx
Current Y ear