A subsidiary's recorded profits and retained earnings must be adjusted for unrealised profits prior to calculation of NCI allocation.The adjustments apply to:
A) upstream transactions.
B) downstream transactions.
C) both upstream and downstream transactions.
D) none of the above.

Question

Quizplus · Accepted Answer

The adjustments for unrealised profits apply to both upstream and downstream transactions. These adjustments ensure that the NCI allocation reflects only the profits that have been earned and realised by the subsidiary. Upstream transactions involve sales between a subsidiary and its parent company, while downstream transactions involve sales between a subsidiary and its subsidiary companies.

A Subsidiary's Recorded Profits and Retained Earnings Must Be Adjusted