Accounting Technician Examination - HKIAATu2014u2014HKIAAT会计技术人员检查.pdfVIP

Accounting Technician Examination Feature Article: Consolidation Procedures – Intra-group Transactions Between Parent and Subsidiary 14 (relevant to ATE Paper 7 – Advanced Accounting) Dr. Teresa M H Ho Introduction This article describes and illustrates the accounting treatment Example 2 – Provision of services for intra-group transactions between a parent company and its subsidiaries. One class of transaction does not include A management fee is billed monthly by P Limited, the parent intercompany profits (gains) or losses while the other class does. company, calculated at 10% of the sales revenue of its subsidiary, S Limited. Both companies have a year end of 30 June. The sales In preparing consolidated financial statements, an entity combines revenue for the year to 30 June 2008 is $3 million. The journal the financial statements of the parent and its subsidiaries by adding entries required to eliminate the intra-group transactions are: together assets, liabilities, equity, income and expenses. In order for the consolidated financial statements to present the group’s financial information as that of a single economic entity, intra- 30/06/2008 group balances and transactions and profits and losses resulting Dr. Revenue from management $300,000 from intra-group transactions must be eliminated in full. services – P Cr. Management fees – S $300,000 The accounting techniques for de