Based on:

AASB 10/IFRS 10 Consolidated Financial Statements requires

1. BCVR entries - Fair value adjustment entries where Assets, liabilities increase in subsidiary Ltd, as a corresponding account, BCVR (owner's equity account) will be used. In addition, goodwill or bargain purchases will be included in BCVR account.

If a goodwill is paid, Dr Goodwill Cr BCVR, if there is a bargain purchase, Dr BCVR Cr Bargain purchases (gain on acquisition) You have been employed as the graduate of Sky Ltd and have been asked advice on the following three technical issues, relating to accounting for intra-group transactions. Issue 1: Our subsidiary company issued a loan to our Parent company on 1 April this year for $800,000. Interest is charged at 15% per annum. Interest payments have not been made by year end. Please explain the consolidation entries required to eliminate this intragroup transaction. Issue 2: What do we need to do with the existing goodwill balance, currently sitting in the subsidiary's financial statements if we have a gain on bargain purchase on acquisition? I believe these are two different accounts and we should not adjust the subsidiary's goodwill. Include in your answer, the adjusting entry required in the consolidation worksheet. Issue 3: (Suggested time: 3 minutes) I am confused as to why we would ever use Retained earnings in intragroup transactions. It doesn't make sense to use equity accounts, to eliminate the effect of unrealised profits. Please explain the reason and provide at least two examples of when this account would be used in consolidation elimination entries.