Advanced reporting
Intercompany eliminations
Eliminate intra-group sales, balances and unrealised profit.
Hollin Group and its subsidiary Fenwick Ltd · year ended 31 December 2026
The group can't make a profit by selling to itself. Set up the year's intra-group trading; the eliminations remove what is internal to the group (IFRS 10.B86(c)).
| Intra-group sales at transfer price | 120,000 |
| Profit made by the seller on those sales | 24,000 |
| Goods still held by the buyer, at transfer price (40%) | 48,000 |
| Unrealised profit48,000 × 25/(100 + 25) | 9,600 |
A mark-up is a percentage of cost, so the profit in a transfer price is mark-up ÷ (100 + mark-up) of it — not the mark-up itself.
| Reduction in consolidated profit | 9,600 |
| Owners of Hollin (80%) | 7,680 |
| Non-controlling interests (20%) | 1,920 |
Fenwick, the subsidiary, made the sale, so the unrealised profit sits in Fenwick's profit. The NCI owns 20% of that profit, so it bears 1,920 of the 9,600 adjustment: profit attributable to the NCI is 20% × (Fenwick's profit − 9,600).
Consolidation adjustments
| Date | Account | Debit | Credit |
|---|---|---|---|
| 31 Dec | 4000Revenue (intra-group sales) | 120,000.00 | |
| 5000Cost of sales | 120,000.00 | ||
| (1) Eliminate intra-group sales and purchases | |||
| 31 Dec | 5000Cost of sales | 9,600.00 | |
| 1200Inventory | 9,600.00 | ||
| (2) Remove unrealised profit from closing inventory (seller is Fenwick, the subsidiary) | |||
| 31 Dec | 3400Non-controlling interests | 1,920.00 | |
| 3100Consolidated retained earnings | 1,920.00 | ||
| (2a) NCI's 20% share of the unrealised profit (upstream sale) | |||
| 31 Dec | 2000Trade payables (intra-group) | 18,000.00 | |
| 1100Trade receivables (intra-group) | 18,000.00 | ||
| (3) Cancel the intra-group receivable and payable | |||
| 31 Dec | 4910Dividend income (Hollin Group) | 40,000.00 | |
| 3200Dividends declared (Fenwick Ltd) | 40,000.00 | ||
| (4) Eliminate Hollin's share of Fenwick's dividend | |||
The other 10,000 of Fenwick's dividend was paid outside the group, to the NCI. It is not eliminated: it appears in the consolidated statement of changes in equity as a reduction of non-controlling interests.
| Line | Change |
|---|---|
| Revenue | (120,000) |
| Cost of sales (an increase is shown as negative) | 110,400 |
| Gross profit | (9,600) |
| Dividend income | (40,000) |
| Consolidated profit for the year | (49,600) |
| Inventory | (9,600) |
| Trade receivables | (18,000) |
| Trade payables | (18,000) |
Revenue and cost of sales fall by the same 120,000, so gross profit moves only by the unrealised profit. Deferred tax on the unrealised profit adjustment (IAS 12) is ignored here.
Learn it properly
- Intercompany eliminations · Intermediate and Advanced Financial Reporting
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