Internal trading: Difference between revisions
imported>Administrator (CSV import) |
imported>Doug Williamson m (Spacing 22/8/13) |
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''Accounting''. | ''Accounting''. | ||
Sales and purchases between companies within the same accounting group. | Sales and purchases between companies within the same accounting group. | ||
Due to internal management reasons and tax transfer pricing regulations it is unlikely in practice that the sale of goods between two group companies would be at cost. The seller would make its normal profit on the sale. | |||
This would be a genuine profit in the accounts of the seller. However if the buyer has not sold the goods they have not left the group, and viewing the group as a single entity, no profit should be recognised. | Due to internal management reasons and tax transfer pricing regulations it is unlikely in practice that the sale of goods between two group companies would be at cost. | ||
The seller would make its normal profit on the sale. | |||
This would be a genuine profit in the accounts of the seller. | |||
However if the buyer has not sold the goods they have not left the group, and viewing the group as a single entity, no profit should be recognised. | |||
A single entity cannot make a profit from selling goods to itself. The profit is said to be unrealised from the group perspective. | A single entity cannot make a profit from selling goods to itself. The profit is said to be unrealised from the group perspective. | ||
For this reason any profits or gains on internal trading are removed from the group accounts on consolidation. | For this reason any profits or gains on internal trading are removed from the group accounts on consolidation. | ||
Also known as internal transfers. | Also known as internal transfers. | ||
== See also == | == See also == | ||
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* [[Group]] | * [[Group]] | ||
* [[Transfer pricing]] | * [[Transfer pricing]] | ||
Revision as of 14:57, 22 August 2013
Accounting.
Sales and purchases between companies within the same accounting group.
Due to internal management reasons and tax transfer pricing regulations it is unlikely in practice that the sale of goods between two group companies would be at cost.
The seller would make its normal profit on the sale.
This would be a genuine profit in the accounts of the seller.
However if the buyer has not sold the goods they have not left the group, and viewing the group as a single entity, no profit should be recognised.
A single entity cannot make a profit from selling goods to itself. The profit is said to be unrealised from the group perspective.
For this reason any profits or gains on internal trading are removed from the group accounts on consolidation.
Also known as internal transfers.
