Peter Chou is the general manager of Madari Ltd. He believes that intragroup transactions can be included within consolidated financial statements as long as the transaction represents fair value. That is, the value of the transaction is equivalent to an arms length transaction.

Required

Prepare a persuasive, but concise (at least 350 words), response to Peter Chou. Mr Chou is not an accountant so ensure that your explanation is understandable to a nonaccountant.