alleryStart learning →Why remove unrealised profit even on arm's length group sales?
ATax law demands the removal
BA group cannot profit from itself
CAuditors prefer lower profit
DSubsidiaries must report losses
Answer & Solution
Correct answer: B. A group cannot profit from itself
A sale between group members does not leave the economic entity, so no profit is earned until sold outside.
Keep practising Consolidated Financial Statement
Browse all Consolidated Financial Statement questions for CA Final, or explore more Auditing topics.
Related questions
Which expenditure is generally immaterial?What is the objective of an audit of financial statements?For the UK small-group exemption, how many of the three tests must be met?Under UK Companies Act 2006 s.399, who must prepare group accounts?What does a holding company usually not do itself?What is the primary business of a holding company?Can a parent company be smaller than its subsidiary?What is a second-tier subsidiary?