FAR 3 - Intercompany Transactions

Question 1

How to find intercompany sales for company?
How to find intercompany sales to sub?
How to find unrealized intercompany profit?

Answer 1

1) Intercompany sales look at revenue
2) Intercompany sales to sub look at AR
3) Intercompany unrealized profit look at inventory

Question 2

If you consolidate what do you do with intercompany transactions? If you DON’T consolidate what do you do with intercompany transactions?

Answer 2

Eliminate 100% of intercomapny trasactions even if noncontrolling interest exists

• If you don’t consolidate DON’T eliminate intercompany transactions
  1) Separate report in financial statements
  2) Footnote disclosure

Question 3

What do you correct if inventory is sold to outsiders?

What do you correct if inventory is still on hand?

Answer 3

When inventory sold to outsiders - correct COGs

When inventory still on hand - correct ending inventory