rolando74
Newbie
Joined: 24 Oct 2010
Online Status: Offline
Posts: 1
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| Posted: 24 Oct 2010 at 19:05 | IP Logged
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I understand that when preparing consolidated financial statements, any
intercompany revenue and expense must be eliminated. For example, if
an insurance company pays commission to a subsidiary broker, then the
commission (expense on the parent's books, revenue on the subsidiary's
books) has to be eliminated on the consolidated books.
My question is: What happens if the amounts booked to the parent and
subsidiary are not the same, because the entities use different accounting
methods? Say the parent uses accrual accounting and the subsidiary uses
cash accounting, so that the expense on the parent's books isn't the
same as the revenue on the subsidiary's books. What amount should be
eliminated in that case when preparing the consolidated statements?
I would be happy to clarify my question if needed. This issue has come up
at the company where I work, and I really need to find out the answer.
Thanks all!
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Topic: Elimination of intercompany revenue
Topic Closed)
