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447 

ANSWER 

WHEELER GROUP 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR TO 30 APRIL 20X7 

 

 

$'000 

Revenue (1,100 + 500) 

 

1,600 

Cost of sales (630 + 300) 

 

  930 

Gross profit  

 

670 

Administrative expenses (105 + 150) 

 

  255 

Profit before taxation 

 

415 

Income taxes (65 + 10) 

 

    75 

Profit for the year 

 

  340 

Profit attributable to: 

 

 

  Owners of the parent (bal fig) 

 

332 

 

  NCI (20%  40) 

 

 

      8 

 

   

 

  340 

Movement on retained earnings 

 

Group profit for year 

 

332 

Retained earnings brought forward (460 + 80%  (106 – 56*)) 

 

 

  500 

Retained earnings carried forward 

 

 

  832 

* Retained earnings at acquisition  

 

We will now look at the complications introduced by intra-group trading and acquisitions part way 

through the year.  

 

2

   Intra-group trading 

Intra-group sales and purchases are eliminated from the consolidated statement of profit or loss (IFRS 

10, para. B86(c)).  

 

 

Like the consolidated statement of financial position, the consolidated statement of profit or loss should 

deal with the results of the group as those of a single entity. When one company in a group sells goods to 

another, an identical amount is added to the sales revenue of the first company and to the cost of sales 

of the second. Yet as far as the entity's dealings with outsiders are concerned, no sale has taken place.  

The consolidated figures for sales revenue and cost of sales should represent sales to, and purchases 

from, outsiders. An adjustment is therefore necessary to reduce the sales revenue and cost of sales 

figures by the value of intra-group sales during the year. 

We have also seen in the last chapter that any unrealised profits on intra-group trading should be 

excluded from the figure for group profits. This will occur whenever goods sold at a profit within the 

group remain in the inventory of the purchasing company at the year end. The best way to deal with this 

for the consolidated statement of profit or loss is to calculate the unrealised profit on unsold inventories 

at the year end and reduce consolidated gross profit by this amount. Cost of sales will be the balancing 

figure. 

 EXAM FOCUS POINT 

The treatment of intra-group trading is very likely to be tested in an exam question on the consolidated 

statement of profit or loss. 

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