Read more: : This is a transaction from parent to subsidiary.
In a downstream transaction, the parent records the transaction and the profit/loss resulting from it.
Under the consolidation method, a parent company combines its own revenue with 100% of the revenue of the subsidiary.
The parent company will report the “investment in subsidiary” as an asset, with the subsidiary reporting the equivalent equity owned by the parent as equity on its own accounts.
Inventory sales in downstream transactions (from parent to subsidiary) are accounted for as internal transfers between departments of a single entity: Financial consolidation is more than just adding up numbers from separate financial statements.
Many companies nowadays rely on technology to avoid the trouble that accompanies handling NCI, ICE, and more.
In both lateral and upstream transactions, the subsidiary records the transaction and the profit/loss from it.