Income taxes accrued or paid on unrealized intercompany profits or gains, either by the parent company or by the subsidiary, are deferred in consolidated financial statements if parent and subsidiary file separate income tax returns.

Question

Quizplus · Accepted Answer

In consolidated financial statements, unrealized intercompany profits or gains are eliminated, and any related income taxes are deferred because the tax effect is not realized until the profits or gains are realized in transactions with outside parties.

Income Taxes Accrued or Paid on Unrealized Intercompany Profits or Gains