Elimination of intercompany profit and debt


 

Elimination of intercompany profit and debt is the term used for the process of calculation of all profits and debts arising from transactions between all companies included in a consolidated statement. This step is necessary because, when the group is viewed as an operational unit (see one-entity theory), these amounts are yet to be realised. Intercompany profit and debt is the difference between, on the one hand, the stated amount of an asset supplied within the group and indicated in the individual balance sheet of the receiving company and, on the other, the value taken as the base from the group perspective (group production or acquisition costs).

 

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