Question: The consolidated nancial statements of Dataserve Submarine Works are being

The consolidated financial statements of Dataserve Submarine Works are being prepared by the group accountant, Raz Kawatra. He is currently in dispute with the auditors over the need to adjust for the NCI share of equity in relation to intragroup transactions. He understands the need to adjust for the effects of the intragroup transactions, but believes that it is unnecessary to adjust for the NCI share of equity. He argues that the NCI group of shareholders has its interest in the subsidiary and as a result is entitled to a share of what the subsidiary records as equity. He also disputes with the auditors about the notion of “realization” of profit in relation to the NCI. If realization requires the involvement of an external entity in a transaction, then in relation to transactions such as intragroup transfers of vehicles and services such as interest payments, there is never any external party involved. Those transactions are totally within the group and never involve external entities. As a result, Raz thinks the more appropriate accounting is to give the NCI a share of subsidiary equity and not be concerned with the fictitious involvement of external entities.
Write a report to Raz convincing him that his argument is fallacious.

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  • CreatedJune 09, 2015
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