Pertemuan 9

Intercompany Profit Transactions – Plant Assets

Bahan Kajian
1. Transfer aset jangka panjang dan jasa antar entitas.
2. Transfer tanah antar entitas:
- Proses eliminasi laba
3. Penjualan tanah dari entitas induk ke entitas anak.
4. Penjualan tanah dari entitas anak ke entitas induk.
5. Eliminasi keuntungan yang tidak terealisasi setelah tahun pertama.
6. Disposisi aset (tanah).

Kemampuan Akhir yang diharapkan

Mahasiswa memahami akuntansi untuk transfer aset tidak lancar yang tidak disusutkan dari
entitas induk ke entitas anak dan dari entitas anak ke entitas induk, sehingga mampu membuat
kertas kerja konsolidasi dan laporan keuangan konsolidasian.

Intercompany Profits – Plant Assets: Objectives

1. Assess the impact of intercompany profit on transfers of plant assets in preparing
consolidations workpapers.
2. Defer unrealized profits on plant asset transfers by either the parent or subsidiary.
3. Recognize realized, previously-deferred profits on plant asset transfers.
4. Adjust the calculations of noncontrolling interest share in the presence of intercompany
profits on plant asset transfers.
Pembahasan
Transfers of Plant Assets
Intercompany sales of nondepreciable fixed assets:
In year of intercompany sale
 Defer any gain or loss
 Restate fixed asset to cost
In years of continued ownership
 Adjust investment account to defer gain or loss (adjust noncontrolling interest too,
if upstream sale)
 Restate fixed asset to cost
In year of sale to outside entity
 Adjust investment account (and noncontrolling interest if upstream sale)
 Recognize the previously deferred gain or loss

Example
Pak owns 90% of San, acquired at cost equal to fair value. In 2011, Pak sells (downstream) land
to San and records a $10 gain. In 2015, San sells the land to an outside entity at a $15 gain. San's
separate income was $70 in 2011, $80 per year for 2012 to 2014, and $90 in 2015. What you
have to do?
Answer:
2011 Calculations
Defer the unrealized gain, with full effect to Pak
 Pak's Income from San
90%(70) – 10 = $53
 Noncontrolling interest share
10%(70) = $7
Elimination entry for 2009 Worksheet

Gain on sale of land (-Ga, -SE) 10

Land (-A) 10

2012 to 2014 Calculations

Continue to defer gain, with full effect to Pak
 Pak's Income from San
90%(80) = $72
 Noncontrolling interest share
10%(80) = $8
Elimination entry for Worksheets in 2012 to 2014

Investment in San (+A) 10

Land (-A) 10

2015 Calculations
Recognize the previously deferred gain, with full effect to Pak
 Pak's Income from San
90%(90) + 10 = $91
 Noncontrolling interest share
10%(90) = $9
Elimination entry for 2015 Worksheet

Investment in San (+A) 10

Gain on sale of land (Ga, +SE) 10

Deferring Unrealized Profits

Unrealized Profits on Fixed Assets
Unrealized profit or loss on nondepreciable fixed assets
 Defer in year of intercompany sale
 Continue deferring by adjusting the investment in subsidiary (and noncontrolling
interest if upstream)
 Recognize full profit or loss upon resale to outside entity

Depreciable Fixed Assets

Gains and losses on intercompany sales of depreciable fixed assets
 Defer in period of intercompany sale
  Recognize gain or loss over remaining life of asset
 Adjust asset and depreciation down for gains
 Adjust asset and depreciation up for losses
 Recognize any unamortized gain or loss upon sale to outside entity

Example
Per owns 80% of Sop, acquired at cost equal to fair value. On 1/1/2011, Per sells machinery to
Sop at a $30 profit. The machinery has a remaining life of 5 years from 1/1/2011. Sop disposes
of the machinery at book value at the end of 5 years. Sop's income is $70 in 2011, $80 per year
for 2012 to 2014, and $90 in 2015. What you have to do?
Answer:
2011 Calculations
Defer the unrealized gain and amortize it over 5 years with full effect to Per
30 gain / 5 years = $6
 Per's Income from Sop
80%(70) – 30 + 6 = $32
 Noncontrolling interest share
20%(70) = $14
Elimination entry for 2011 Worksheet

Gain on sale of machinery (-Ga, -SE) 30

Machinery (-A) 30
Accumulated depreciation (+A) 6
Depreciation expense (-E, +SE) 6

Recognizing Realized, Previously Deferred Profits

Previously Deferred Gains/Losses
Recognize over the life of the depreciable asset
 Downstream sales
 Adjust investment in subsidiary account
  Upstream sales
 Adjust investment in subsidiary account and noncontrolling interest,
proportionately
 Intercompany sales at a gain
 Adjust asset and depreciation down
 Intercompany sales at a loss
 Adjust asset and depreciation up

2012 to 2014 Calculations

Continue to recognize part of the gain, with full effect to Per
 Per's Income from Sop
80%(80) + 6 = $70
 Noncontrolling interest share
20%(80) = $16
Elimination entry for Worksheets in 2012

Investment in Sop (+A) 24

Accumulated depreciation (+A) 6
Machinery (-A) 30
Accumulated depreciation (+A) 6
Depreciation expense (-E, +SE) 6

Worksheet entries for 2013

Investment in Sop (+A) 18

Accumulated depreciation (+A) 12

Machinery (-A) 30

Accumulated depreciation (+A) 6

 Depreciation expense (-E, +SE) 6

Worksheet entries for 2014

Investment in Sop (+A) 12

Accumulated depreciation (+A) 18

Machinery (-A) 30

Accumulated depreciation (+A) 6

Depreciation expense (-E, +SE) 6

2015 Calculations
Recognize the remaining deferred gain, with full effect to Per
 Per's Income from Sop
80%(90) + 6 = $78
 Noncontrolling interest share
20%(90) = $18

Elimination entries for 2015 Worksheet

Investment in Sop (+A) 6

Accumulated depreciation (+A) 24

Machinery (-A) 30

Accumulated depreciation (+A) 6

Depreciation expense (-E, +SE) 6

Exercise
 1. Pak owns 70% of San, acquired at cost equal to fair value. In 2011, Pak sells
(downstream) land to San and records a $10 gain. In 2015, San sells the land to an
outside entity at a $15 gain. San's separate income was $70 in 2011, $80 per year for
2012 to 2014, and $90 in 2015. What you have to do?
2. Per owns 70% of Sop, acquired at cost equal to fair value. On 1/1/2011, Per sells
machinery to Sop at a $30 profit. The machinery has a remaining life of 5 years from
1/1/2011. Sop disposes of the machinery at book value at the end of 5 years. Sop's
income is $70 in 2011, $80 per year for 2012 to 2014, and $90 in 2015. What you have to
do?

Reference

Floyd A. Beams. 2011 Advanced Accounting, 13th Edition. Prentice Hall.