When preparing a consolidated statement of financial position, any profit (selling price minus initial cost) made by one member of the group against another should be eliminated unless it has been realized by disposal to someone outside the group.

Which of the following is the reason for this?

Select one:

a.

Because an entity cannot make a profit against its own self.

b.

Because it is fashionable to do so.

c.

Because only the parent can make a profit from inter-group transactions.

d.

Because the unsold goods may have to be returned to the party purchased from.