Question Two

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 'arm's length' transaction.

Required : a persuasive, but concise, response to Peter Chou. Mr Chou is not an accountant so ensure that the explanation is understandable to a non accountant.