Which of the following statements is incorrect?Group of answer choicesWhen adjustments for intragroup transactions affect the carrying amount of assets or liabilities, further adjustments are made for the tax effect of those adjustments.The profits or losses generated from intragroup transfers of assets are only considered realised from the group's perspective when those assets are transferred to external entities.Adjustments are determined by comparing the amounts recognised in the individual accounts affected with the amounts that the group should recognise.Adjustments are required for both prior period and current period intragroup transactions to the extent that the effects of those transactions are still present in the individual accounts of the entities involved.
Question
Which of the following statements is incorrect?Group of answer choicesWhen adjustments for intragroup transactions affect the carrying amount of assets or liabilities, further adjustments are made for the tax effect of those adjustments.The profits or losses generated from intragroup transfers of assets are only considered realised from the group's perspective when those assets are transferred to external entities.Adjustments are determined by comparing the amounts recognised in the individual accounts affected with the amounts that the group should recognise.Adjustments are required for both prior period and current period intragroup transactions to the extent that the effects of those transactions are still present in the individual accounts of the entities involved.
Solution
The incorrect statement is: "The profits or losses generated from intragroup transfers of assets are only considered realised from the group's perspective when those assets are transferred to external entities."
This is not always true. Intragroup profits or losses can be realized even when the assets are still within the group, depending on the accounting policies and practices of the group. For example, if one entity within the group sells an asset to another entity within the group at a profit, this profit may be recognized immediately, even though the asset has not been transferred to an external entity.
Similar Questions
Which of the following statements describes the effect that adjusting entries may have on liabilities?Multiple choice question.Adjusting entries reduce liabilities for the amount of any accrued and unpaid expenses at the end of the period.Adjusting entries increase liabilities for the amount of any accrued and unpaid expenses at the end of the period.Adjusting entries do not have any effect on liabilities, since cash is not included in the adjusting entries.
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