Inter Company Self Constructed PPE

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Dept A constructs a power plant for Dept B, both depts are within same company. Dept A treats as normal business transaction with margin whereas Dept B will treat it as asset. According to IAS16 PPE, dept B cannot capitalise margin. As such, the margin will be expensed off in Dept B's P&L as cost of sales.

Question: Can Dept A recognises as internal sales with margin?
 

kirby

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If A constructs an asset at cost X for B then A should sell it to B for X. A cannot record gain on sale or profit margin for an intercompany sale. If, for some reason, you want to show an intercompany "profit' internally for A then, yes, B has to show an offsetting intercompany loss. And the profit and loss need to be eliminated in consolidation.
 

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