Question

How do unrealized intercompany inventory profits from a prior period affect the computation of consolidated net income when the inventory is resold in the current period? Is it important to know if the sale was upstream or downstream from a financial and economic perspective to the parent? Why?

Answer 1

Please see the answer below.

Step-by-step explanation:

if in the cutting-edge duration there are unrealized intercompany stock income that becomes an end result of the earlier period, earnings must be added into consolidated net income and then it has to be assigned to the shareholders who made the intercompany sale.

if the profits become because of a downstream sale, income which is assigned to the controlling interest desires to be adjusted through growing the amount of the realized income and if that is due to an end result of upstream sale, profits which is assigned to the controlling, in addition to the non-controlling interest, wishes to be adjusted by means of growing the quantity of earnings while income changed into realized.

sure, it's far very essential to understand the popularity of the sale whether or not it becomes an upstream or downstream due to the elements like whether or not earnings at the sale is adjusted for controlling and non controlling agencies and similarly, for you to as it should be assigned the consolidated internet profits to the correct shareholder