Upstream sales of depreciable assets from a subsidiary to a parent result in unrealized gains or losses in the subsidiary accounts in the year after the sale.

Question

Quizplus · Accepted Answer

Unrealized gains or losses from upstream sales of depreciable assets are recognized in the parent's accounts, not the subsidiary's, because the parent company must eliminate the profit made on transactions with its subsidiary to accurately present the consolidated financial statements.

Upstream Sales of Depreciable Assets from a Subsidiary to a Parent