Consolidations: Profits on intercorporate inventory sales
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When are profits on intercorporate sales considered to be realized? Explain. How are unrealized profits on current-period intercorporate sales treated in preparing the income statement for (a) the selling company and (b) the consolidated entity? Explain.
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Solution Summary
Your discussion is 197 words and explains how the treatment differs on the stand-alone financials versus the consolidated group.
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Intercorporate sales are recognized on the selling firm's financial statements when the sale is made. That is, the sale is recognized as if the sale was an ordinary sale like any other sale to an arms-length customer in the typical customer transaction. If the seller creates stand-alone financial statements, the related party ...
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