Unrealised profits on intra-group sale of inventories arise if:
A) the sale is an upstream transaction
B) the sale is a downstream transaction
C) the inventories are held within the group at date of consolidation
D) none of the above

Question

Quizplus · Accepted Answer

Unrealized profits on intra-group sale of inventories arise if the inventories are held within the group at date of consolidation. This is because one entity sells to another entity within the group at a profit, but the profit is eliminated at the consolidation stage as the group is treated as a single economic entity. Upstream and downstream transactions may or may not involve unrealized profits.

Unrealised Profits on Intra-Group Sale of Inventories Arise If