Intra-group trading -

Adjustments
BY DR. IMRAN RAMZAN
Intra-group trading

Intra-group trading refers to the buying and selling of goods

or services between companies that are part of the same
group.
Types of intra-group trading
P and S may well trade with each other leading to the
following potential problem areas:
1. current accounts between P and S
2. loans held by one company in the other
3. dividends and loan interest
4. unrealised profits on sales of inventory
5. unrealised profits on sales of non-current assets
Current accounts
If P and S trade with each other than this will probably be done on
credit.
These intra-group transactions are usually recorded within a single
account in each entity, known as the current account.
➢a receivables (current) account in one entity
➢a payables (current) account in the other entity
These are amounts owing within the group rather than outside the
group.
Therefore they must not appear in the consolidated statement of
financial position.
Plant bought 80,000 shares in Shrub in
20X1 when Shrub’s reserves included a
share premium of $30,000 and retained
earnings of $5,000.
Plant's records show $6,000 owing to
Shrub, but Shrub's records show $8,000
owed by Plant. The difference is explained
as cash in transit.
No impairment of goodwill has occurred
to date.
Plant uses the proportion of net assets
method to value the non-controlling
interest.
Prepare Plant’s consolidated statement
of financial position as at
31 March 20X7.
Plant bought 60,000 shares in Shrub in
20X1 when Shrub’s reserves included a
share premium of $30,000 and retained
earnings of $7,000.
Plant's records show $8,000 owing to
Shrub, but Shrub's records show $10,000
owed by Plant. The difference is explained
as cash in transit.
$1,000 impairment of goodwill has
occurred to date.
Plant uses the proportion of net assets
method to value the non-controlling
interest.
Prepare Plant’s consolidated statement
of financial position as at
31 March 20X7.