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Editorial Board on Accounts and Audit
  • Consolidation

    by Vivek on Monday, November 11, 2019 at 02:06 AM

    Sir,A subsidiary company earned a profit of Rs 12.40 lacs in 17-18.During 17-18, Rs 0.55 lacs was received from insurance company against loss of stock due to fire which occurred on 31st Jan.17 in which goods worth Rs 0.75 lacs were damaged and were part of Subsidiary's stock on 31.3.17. Query-Whether above is intra group transaction bcoz they only require adjustment in Consolidation ?? Am i right? 2) Pls tell reason also ? 3) What will be the treatment of above transaction in Consolidation

    Replied byEditorial Board Wednesday, November 20, 2019 at 07:40 PM

    It is not clear from the question that whether the insurance company is holding company. Assuming yes, the transaction of payment of insurance claim by the insurance company to the subsidiary company shall be considered as intra-group transaction.

    So, while preparing consolidated statement of profit and loss, the expense (payment of claim) of insurance company shall be adjusted with the income (receipt of claim) of the subsidiary company. In the consolidated balance sheet, no adjustment is required as the consolidated bank balance of both the companies will reflect the bank balance of the group.

    The answer is based on the assumptions mentioned. Answer may change if the facts or the assumptions change.

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