If a subsidiary is a 100 percent-owned affiliate and sells to the parent,the parent defers 100 percent of any unrealized profit in the year of the intercompany sale.

Question

Quizplus · Accepted Answer

This statement is true. When a subsidiary, which is a 100 percent-owned affiliate of the parent company, sells goods or services to the parent company, any unrealized profit is deferred in the parent company's financial statements. This is done to avoid recognizing profit twice within the consolidated financial statements of the parent company.

If a Subsidiary Is a 100 Percent-Owned Affiliate and Sells