What is Consolidation eliminations?
In short
Consolidation eliminations remove the effects of transactions and balances between a parent and its subsidiaries, so the consolidated statements show the group as if it were one entity.
Key takeaways
- Intercompany sales, receivables and payables are eliminated in full.
- Unrealized profit on intercompany inventory or asset sales still held in the group is eliminated.
- The parent's investment account is eliminated against the subsidiary's equity, with any excess allocated to fair value adjustments and goodwill.
Where it's tested
FAR: Business Combinations & Consolidations — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
In preparing consolidated financial statements, which of the following must be eliminated?