The adjustment to the retained earnings opening

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The adjustment to the retained earnings (opening balance) and non-current asset is the difference between the sale price and the original cost (i.e. intragroup profit). 33
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Intragroup services Many different examples of services between a parent and its subsidiary exist, as follows. Laura Ltd may lend some specialist personnel to George Ltd for a limited period of time to perform a particular task for George Ltd. For this service, Laura Ltd may charge George Ltd a certain fee, or expect George Ltd to perform other services in return. George Ltd may lease or rent an item of plant or a warehouse from Laura Ltd or vice versa. 34
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Intragroup services Realisation of intragroup profits or losses: With the transfer of services within the group, the consolidation adjustments do not affect the profit of the group. In a transaction involving a payment by a parent to a subsidiary, or vice versa, for services rendered, the parent shows an expense and the subsidiary shows a revenue. The net effect on the group’s profit is zero. 35
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Intragroup services Realisation of intragroup profits or losses: In preparing the consolidation adjustment entries for current period intragroup services, note the following. The adjustment to service revenue and service expense is the intragroup fee charged for those services. 36
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Intragroup services Realisation of intragroup profits or losses: If the intragroup services have not been paid by the end of the current period, an adjustment to fees receivable and fees payable is also required for the amount unpaid. There is no tax adjustment. 37
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Dividends According to paragraph 12 of AASB 127/IAS 27 Separate Financial Statements: Dividends from a subsidiary, a joint venture or an associate are recognised in the separate financial statements of an entity when the entity’s right to receive the dividend is established. The dividend is recognised in profit or loss unless the entity elects to use the equity method, in which case the dividend is recognised as a reduction from the carrying amount of the investment. 38
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Dividends Dividends declared in the current period but not paid: In preparing the consolidation adjustment entries for current period dividends declared and not yet paid, note the following. The adjustment to dividend revenue, dividend declared, dividend receivable and dividend payable is the amount of dividend declared intragroup. There is no tax adjustment. 39
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Dividends Dividends declared and paid in the current period: In preparing the consolidation adjustment entries for current period dividends declared and paid, note the following. The adjustment to dividend revenue and dividend declared is the amount of dividend declared intragroup.
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