The adjustment to cost of sales is the before tax

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The adjustment to cost of sales is the before-tax profit on inventories on hand at the beginning of the period. 16
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Inventories The adjustment to income tax expense is the tax rate times the adjustment to cost of sales. Note that the amount for which the inventories are on-sold to external entities after the intragroup transfer does not matter in the adjustments. Note that only the amount of unrealised profit in beginning inventories is needed in the adjustments; the amount for which the inventories are transferred intragroup in the prior period does not matter per se. 17
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Property, plant and equipment Besides transferring inventories, it is possible for property, plant and equipment to be transferred within the group. The worksheet adjustment entries are shown in two parts: entries to adjust for any profit or loss on transfer of the assets entries relating to any depreciation of the assets after transfer. 18
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Property, plant and equipment If a non-depreciable asset such as land is transferred, only the first of the above two sets of entries is required, and realisation of the profit or loss occurs, as with inventories, on sale of the asset to an external entity. 19
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Property, plant and equipment Sale of property, plant and equipment: In preparing the consolidation adjustment entry for intragroup sale, for a profit, of non-current assets remaining on hand at the end of the current period, note the following. The adjustment to both gain on sale and the non-current asset is the difference between the intragroup sale price and the carrying amount at the point of sale (i.e. intragroup profit). 20
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Property, plant and equipment Sale of property, plant and equipment: The tax effect adjustment is always equal to the tax rate multiplied by the intragroup profit and is posted as a debit to deferred tax asset and a credit to income tax expense. The adjustment to the retained earnings (opening balance) is the after-tax intragroup profit. 21
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Property, plant and equipment Depreciation and realisation of profits: Depreciation is generally measured as a function of the cost of the asset. As the cost of the asset to the group is different from that recorded by the legal entity holding the asset, it is necessary to make adjustments in relation to depreciation. 22
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Property, plant and equipment Depreciation and realisation of profits: The adjustment per annum to the accumulated depreciation and depreciation expense is the difference between the intragroup selling price of the asset and its carrying amount at the time of the intragroup sale times the depreciation rate. 23
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Property, plant and equipment Depreciation and realisation of profits: The tax effect adjustment is equal to the tax rate multiplied by the adjustment to accumulated depreciation or depreciation expense and is posted as a debit to income tax expense and a credit to deferred tax asset.
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