The transfer of nondepreciable plant assets between affiliates at a price other than book value gives rise to unrealized profit or loss to the consolidated entity.

Question

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When nondepreciable plant assets are transferred between affiliates at a price other than book value, the difference between the selling price and the book value represents unrealized profit or loss. This unrealized profit or loss needs to be eliminated in the consolidation process to ensure accurate reporting of the consolidated financial statements.

The Transfer of Nondepreciable Plant Assets Between Affiliates at a Price