ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Parent H owns 60% of S. For the year, S reports profit after tax of $200,000. H sold goods to S at a profit during the year; the unrealised profit in S's closing inventory is $10,000. H made the sale (downstream). What is the profit for the year attributable to the non-controlling interest?
The NCI share of profit is $80,000. Because the intragroup sale was made by the parent (downstream), the unrealised profit adjustment is charged wholly to the parent's profit, so the NCI simply takes 40% of the subsidiary's reported profit of $200,000.
- A$80,000Correct
- B$76,000
- C$84,000
- D$120,000
Explanation
For a downstream sale the unrealised profit is eliminated entirely against the parent's profit, so the NCI share is unaffected. NCI = 40% × 200,000 = 80,000. 76,000 wrongly deducts the provision from S's profit, and 84,000 adds it back.
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