Join the waitlist

Intercompany Inventory Profit Elimination Calculator (Upstream and Downstream)

What do the numbers come to once the work is shown?

Unrealized profit in ending inventory, the cost of sales elimination for the year and the NCI share on upstream sales.

  • Runs in your browser
  • Nothing stored or sent
  • Free, no sign-up
Your figures
Example figuresIllustrative only. Type over them with your own.
Unrealized profit in ending inventory
$225,000
Deducted from consolidated inventory
Increase in cost of sales for the period
$75,000
Sales and cost of sales eliminated
$3,000,000
Drawn to one scale
Unrealized profit in ending inventory$225,000
Increase in cost of sales for the period$75,000
Sales and cost of sales eliminated$3,000,000
NCI share of the profit deferral$15,000
Effect on income attributable to the parent-$60,000
All results
MeasureResult
Unrealized profit in ending inventory$225,000
Increase in cost of sales for the period$75,000
Sales and cost of sales eliminated$3,000,000
NCI share of the profit deferral$15,000
Effect on income attributable to the parent-$60,000
How this was worked out
Work shownrecomputed as you type
Unrealized profit = intercompany sales x share in ending inventory x gross margin
Period effect on cost of sales = closing unrealized profit - opening unrealized profit
Upstream: NCI shares the period effect

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Unrealized profit = intercompany sales x share in ending inventory x gross margin
  • Period effect on cost of sales = closing unrealized profit - opening unrealized profit
  • Upstream: NCI shares the period effect

How it works

ASC 810-10-45-1 eliminates intercompany profit or loss on assets remaining within the consolidated group. Intercompany sales and cost of sales are eliminated in full, and profit in the buyer's ending inventory is deferred until the goods are sold outside the group.

ASC 810-10-45-18 allows the elimination to be allocated between the parent and NCI. On upstream sales this tool allocates it in proportion to the NCI ownership of the selling subsidiary.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Why does opening profit reduce cost of sales?

Profit deferred last year is realized this year when those goods are sold outside the group.

Is income tax affected?

Yes, through an exception for inventory. Under ASC 810-10-45-8, income taxes the seller paid on intra-entity profit in inventory still in the group are deferred, and ASC 740-10-25-3(e) bars a deferred tax asset for the buyer's basis difference. ASU 2016-16 removed that exception for other assets and kept it for inventory.

Downstream with NCI in the buyer?

The full elimination is charged to the parent on downstream sales.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

Related audit calculators

CalculatorGoodwill or Bargain Purchase Gain Calculator (ASC 805)Goodwill from consideration, NCI and previously held interest against net identifiable assets, with the step acquisition gain.CalculatorNet Periodic Pension Cost Calculator with 10 Percent Corridor (ASC 715)Service cost, interest cost, expected return, prior service cost and corridor amortization of net loss, split by line.CalculatorAudit Confirmation Response Rate and Coverage CalculatorResponse rate by count and value, exceptions, and coverage of the confirmed population after alternative procedures.
For US CPA firms

Join the CORAA waitlist

CORAA AI drafts audit working papers from your client’s QuickBooks books and does the first pass: lead schedules, tie-out, memos, draft notes and letters. CORAA Network reviewers clear every finding. Your firm reviews and signs.

  • First audit free, so you can judge the quality on a real file
  • Flat fee by entity size; messy books included
  • We work only with CPA firms, never their clients
See how it works →

* required