Intercompany transfers of services and noncurrent assets part 2
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Intercompany Transfers
of Services and Noncurrent Assets
(Part 2)
Chapter 07BAKER CHRISTENSEN COTTLRELL
Advanced Financial AccountingNinth Edition
McGRAW HILL INTERNATIONAL EDITION
Learning Objective 4
Prepare equity-method journal entries and elimination entries for the consolidation of a subsidiary
following an upstream land transfer.
Illustration (p. 318 - 321)Peerless Products Corporation acquires land for $20,000 on January 1, 20X1, and sells the land to its subsidiary, Special Food Incorporated, on July 1, 20X1, for $35,000
Peerless Product
SpecialFoods
Jan 1, 20X1Jul 1, 20X1
Purchase land
Inter-corporate transfer of
land
Consolidated Entity
$35 $20
Upstream Sale of Land• Peerless Products purchases 80% of the common
stock of Special Foods on Dec 31, 20X0, on its book value of $240,000. The fair value of Special Foods NCI is equal to its book value of $60,000.• During 20X1, Peerless reports separate income of
$140,000 and declares dividends of $60,000.• Special Foods reports net income of $50,000 and
declares dividend of $30,000.• July 1, 20X1, Special Foods sells land to Peerless for
$35,000, which was purchased on Jan 1, 20X1, for $20,000, resulting an unrealized gain of $15,000. • Special Foods holds the land until the following
years.
P
S
NCI
20%
80%
Requirement: Peerless’ entry on 20X1 and deferral entry for sold land.
Partially Owned Upstream Sales Equity Method Adjustment• Similar to what we did with inventory
transfers: we must share deferral with the NCI shareholders• Simply split up the adjustment for unrealized
gains proportionately.
Unreal. 3,000 Gain To NCI Shareholders
P
S
NCI
20%
80%Equity MethodAdjustments
Investment in Special Foods
12,000
Income from Special Foods
12,000Unreal. GainNI 52,000 52,000 NI
40,000
• 20X1 Peerless records its share of Special Foods’ income and dividend under the fully adjusted method:
(8) Investment in Special Foods 40,000 Income from Special Foods 40,000Record Peerless’ 80% share of Special Foods’ 20X1 income
(9) Cash 24,000 Investment in Special Foods 24,000Record Peerless’ 80% share of Special Foods’ 20X1 dividend
Fully adjusted equity-method entries – 20X1• Under the fully adjusted equity method, Peerless Inc. defers
relative share of the unrealized gross profit is $12,000 (15,000 X 0.80)
Until resold to external party by Special Food, the carrying value of land must be reduces each time consolidated statements are prepared
(10) Income from special Foods 12,000 Investment in Special Foods 12,000Defer gain on intercompany land sale to Special Foods.
Basic investment account elimination entry:
Common stock 200,000Retained earnings 100,000Income from Special Foods 40,000NCI in NI of Special Foods 10,000 Dividend declared 30,000 Investment in Special Foods 256,000 NCI in NA of Special Foods 64,000
Group Exercise 2: Partial Ownership Land Transfer• Stubben Corporation is a 90%-owned subsidiary of Parker
Corporation, acquired for $270,000 on 1/1/X5.• Investment cost was equal to book value and fair value.• Stubben’s net income in 20X5 was $70,000, and Parker’s
income, excluding its income from Stubben, was $90,000.• Stubben’s income includes a $10,000 unrealized gain on land
that cost $40,000 and was sold to Parker for $50,000.• Assume that Parker sold the land in 20X7 for $65,000.• Assume Parker adjusts for this transaction in the equity
accounts.• Assume that Stubben sold the land in 20X7 for $65,000.• Assume Parker adjusts for this transaction in the equity
accounts.Required: 1. What entry(ies) would Parker make in 20X5 and 20X7?2. Prepare the consolidation entries at 12/31/X5, 12/31/X6,
and 12/31/X7.
P
S
NCI
10%
90%
Partially Owned Upstream Sales Equity Method Adjustment• Similar to what we did with inventory
transfers: we must share deferral with the NCI shareholders• Simply split up the adjustment for unrealized
gains proportionately.
Unreal. 1,000 Gain To NCI Shareholders
P
S
NCI
10%
90%Equity MethodAdjustments
Investment in Stubben
9,000
Income from Stubben
9,000Unreal. GainNI 63,000 63,000 NI
54,000
Partially Owned Upstream Sales Equity Method Adjustment• Similar to what we did with inventory
transfers: we must share deferral with the NCI shareholders• Simply split up the adjustment for unrealized
gains proportionately.
Unreal. 1,000 Gain To NCI Shareholders
P
S
NCI
10%
90%Equity MethodAdjustments
Investment in Stubben
9,000
Income from Stubben
9,000Unreal. GainNI 63,000 63,000 NI
54,000
Solution: Parker Company Equity Method Journal Entries
20X5 Equity Method Entries
Requirement 1
20X7 Equity Method Entry (after Stubben resold the land)
Solution: Parker Company Equity Method Journal Entries
Consolidation Entry at 12/31/X5
Consolidation Entry at 12/31/X6
Requirement 2
Requirement 3Consolidation Entry at 12/31/X7 (Stubben resold the land in 20X7)
Consolidation Worksheet—20X5
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Gain on Sale 10,000 10,000 0
Income from Sub 54,000 54,000Basic 0
Balance Sheet
Investment in Sub 324,000 324,000Basic 0
Land 50,000 10,000 40,000
Consolidation Worksheet—20X6
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Income from Sub Basic 0Balance Sheet
Investment in Sub (9,000)Lower
9,000Basic 0
NCI in NA 1,000 1,000Lower
Land 50,000 10,000 40,000
Consolidation Worksheet—20X7
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Gain on Sale 15,000 10,000 25,000 Income from Sub Basic 0Balance Sheet
Investment in Sub (9,000)Lower
9,000Basic 0
NCI in NA 1,000 1,000Lower
Land 0
Learning Objective 5
Prepare equity-method journal entries and elimination entries for the consolidation of a subsidiary
following a downstream depreciable asset
transfer.
Transfers of Depreciable Assets• What is the major difference between depreciable and non-
depreciable assets?• Depreciation—DUH!• Adds complexity because you have a “moving target” instead
of a stationary target. However, the concepts are the same!
• Adjust for:• Unrealized gain (same as with land)• Differences in depreciation expense
• The goal is to get back to the asset’s old basis “as if ” it were still on the books of the original owner.• One difference—depreciated going forward based on the new
estimated new life.• Same as a change of depreciation estimates on any
company’s books
Developing Fixed Asset Elimination Entries• Compare “Actual” with “As if ”
• “Actual” = How the transferred asset and related accounts actually appear on the companies’ books
• “ As if ” = How the transferred asset and related accounts would have appeared if the asset had stayed on the original owner’s books
• The difference between the two gives the elimination entry or entries.
Choosing the Right Depreciable Life• What’s not relevant?• The original owner’s remaining useful life at the transfer
date.
• What’s relevant?• The acquirer’s estimated remaining useful life (if
different from the original remaining life).
Example 3—End of Year Transfer
What is the amount of the gain or loss recorded by Padre at the time of the fixed asset transfer?
Assume Padre Corp. purchased a machine on 1/1/20X1 for $100,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on 12/31/20X2, Padre Corp. sold the machine to its 100% owned subsidiary, Sonny Co., for $90,000. Sonny Co. estimated that the asset had a remaining useful life of five years.
Sale:
Proceeds $90,000 Book Value 80,000Gain $ 10,000
100,000
MachineAccumulated Depreciation
20,000
Book Value = 80,000
Example 3—End of Year Transfer
What accounts and balances actually exist after the fixed asset transfer?
90,000 0
MachineAccumulated Depreciation Gain on Sale
10,000“Actual”
Assume Padre Corp. purchased a machine on 1/1/20X1 for $100,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on 12/31/20X2, Padre Corp. sold the machine to its 100% owned subsidiary, Sonny Co., for $90,000. Sonny Co. estimated that the asset had a remaining useful life of five years.
Example 3—End of Year Transfer
What balances would have existed if the transfer had not taken place?
90,000 0
MachineAccumulated Depreciation Gain on Sale
10,000“Actual”
“As if”100,000 20,000 0
Assume Padre Corp. purchased a machine on 1/1/20X1 for $100,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on 12/31/20X2, Padre Corp. sold the machine to its 100% owned subsidiary, Sonny Co., for $90,000. Sonny Co. estimated that the asset had a remaining useful life of five years.
Example 3—End of Year TransferThe worksheet entry on 12/31/X2 to eliminate the asset transfer is simply the “adjustment” to change from “actual” to “as if” the asset hadn’t been transferred.
90,000 0
MachineAccumulated Depreciation Gain on Sale
10,000“Actual”
“As if”100,000 20,000 0
Gain on Sale 10,000Machine 10,000
Accumulated Depreciation 20,000
10,000 20,000 10,000
Example 4: Beginning of Year TransferAssume Padre Corp. purchased a machine on 1/1/20X1 for
$100,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on 1/1/20X3, Padre Corp. sold the machine to its 100% owned subsidiary, Sonny Co., for $90,000. Sonny Co. estimated that the asset had a remaining useful life of five years.
How much depreciation expense will Sonny record in 20X3?
Depreciation Expense= (C – SV) / # years = (90,000 – 0) / 5 years = $18,000
How much depreciation expense would Padre have recorded in 20X3 if it had retained the machine and simply changed the estimated life to five years?
Depreciation Expense= (BV – SV) / # years left= (80,000 – 0) / 5 years = $16,000
Example 4: Beginning of Year TransferAssume Padre Corp. purchased a machine on 1/1/20X1 for $100,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on 1/1/20X3, Padre Corp. sold the machine to its 100% owned subsidiary, Sonny Co., for $90,000. Sonny Co. estimated that the asset had a remaining useful life of five years.
Sonny’s 20X3 expense can be separated into two parts:• The portion associated with the original book value from Padre’s
books.• The portion associated with the extra amount paid above Padre’s
book value (the gain).Gain = 10,000 5 = 2,000 Extra Depreciation
Book Value = 80,000 5 = 16,000 Padre Depreciation18,000 Total Sonny Depreciation
Example 4: Beginning of Year Transfer
18,000 “Actual” 18,000
Depreciation Expense
Accumulated Depreciation
16,000 “As if” 16,0002,0002,000
Accumulated Depreciation 2,000 Depreciation Expense 2,000
Assume Padre Corp. purchased a machine on 1/1/20X1 for $100,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on 1/1/20X3, Padre Corp. sold the machine to its 100% owned subsidiary, Sonny Co., for $90,000. Sonny Co. estimated that the asset had a remaining useful life of five years.
What is the first elimination entry?
Example 4: Beginning of Year TransferAssume Padre Corp. purchased a machine on 1/1/20X1 for $100,000 and estimated that the machine would have a useful life of 10 years with no salvage value. After two years, on 1/1/20X3, Padre Corp. sold the machine to its 100% owned subsidiary, Sonny Co., for $90,000. Sonny Co. estimated that the asset had a remaining useful life of five years.
What balances would have existed if the transfer hadn’t taken place?
Machine
90,000
100,000
“Actual”
“As if”
Accumulated Depreciation
18,000
36,000
Gain on Sale
10,000
0
Machine
Example 4: Beginning of Year TransferThere are two worksheet entries on 12/31/X3 to compare “actual”
to “as if” to make it appear like the asset hadn’t been transferred.
90,000
100,000
10,000“Actual”
“As if”
What is the second elimination entry?
Accumulated Depreciation
2,00018,000
36,000
20,000
Gain on Sale
10,000
0
10,000
Gain on Sale 10,000Equipment 10,000
Accumulated Depreciation 20,000
Accumulated Depreciation 2,000 Depreciation Expense 2,000
Example 5: Partial Ownership Depreciable Asset Transfer at the End of the YearPericles Corporation sells machinery to its 80%-owned subsidiary, Sophocles Corporation, on 12/31/20X4. The machinery has a book value of $60,000 on this date (cost $120,000 and accumulated depreciation $60,000), and it is sold to Sophocles for $90,000. Thus, this transaction produces an unrealized gain of $30,000. Assume that Pericles adjusts its equity method accounts accordingly.
Note: Transfer is on last day of the year.
Required:1.What journal entry would Pericles make on itsbooks to adjust for the unrealized gain from this transaction?2.What worksheet entry would Pericles make to
consolidate on this date?
P
S
NCI
20%80%
Example 5: Partial Ownership Depreciable Asset Transfer at the End of the Year
Income from Sub 30,000Investment in Sub 30,000
Requirement 1: Equity Method for unrealized gain
Sale:
Proceeds $90,000 Book Value 60,000Unrealized Gain $ 30,000
Investment in Sub
30,000
Income from Sub
30,000Defer Gain
Equipment
120,000
Accumulated Depreciation
60,000
Book Value = 60,000
Gain on Sale 30,000Equipment 30,000
Accumulated Depreciation 60,000
Requirement 2: Worksheet Entry
EquipmentSub 90,000
30,000
Parent 120,000
Accumulated Depreciation
0 60,000
60,000“As if”
“Actual”
Example 5: Partial Ownership Depreciable Asset Transfer at the End of the Year
Example 6: Depreciable Asset Transfer at Beginning of YearGiven all other information from the previous example, assume
that the transfer takes place on 1/1/20X4. Also, assume that as of the date of transfer, the machinery has a five-year remaining useful life (with no residual value) and that Sophocles uses straight-line depreciation. In addition to the journal entries to record the transfer of the asset, Sophocles also records depreciation expense of $18,000 for 20X4 ($90,000 / 5 years).
Note: Transfer is on first day of the year.
Required:1.What journal entry(ies) would Pericles make on its books to adjust for the unrealized gain from this transaction?
2. What worksheet entry(ies) would Pericles make to consolidate on this date?
Example 6: Depreciable Asset Transfer at Beginning of Year
Requirement 1:
Of the $18,000 of depreciation recorded, $12,000 is based on the BV at the time of transfer and $6,000 is based on the unrealized gain component. We can think of the $6,000 as the cancelation of 1/5 of the unrealized gain.
Gain = 30,000 5 = 6,000 Extra Depreciation
Book Value = 60,000 5 = 12,000 Parent Depreciation
18,000 Total Depreciation
Income from Sub 30,000Investment in Sub 30,000
Investment in Sub 6,000 Income from Sub 6,000
Investment in Sub30,000
6,000
Income from Sub30,000
6,000Extra DepreciationDefer Gain
Example 6: Depreciable Asset Transfer at Beginning of Year
Gain on Sale 30,000Equipment 30,000
Accumulated Depreciation 60,000
Accumulated Depreciation 6,000 Depreciation Expense 6,000
Requirement 2: Worksheet Entries
EquipmentSub 90,000
30,000
Parent 120,000
Accumulated Depreciation
18,000 60,000
72,000“As if”
“Actual” 6,000
Example 6: Depreciable Asset Transfer at Beginning of Year
Consolidation Worksheet—20X4
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Gain on Sale 30,000 30,000 0
Depreciation Expense 18,000 6,000 12,000
Balance Sheet Equipment 90,000 30,000 120,000
Accumulated Depreciation 18,000 6,000 60,000 72,000
Example 6: Subsequent YearsGiven all other information from the previous examples,
consider what happens in the last 5 years of the asset’s useful life. Think about both the equity method entry Pericles would have to make each year and what elimination entry would be made each year.
Note: Transfer is on first day of the year.
Required:1.What journal entry would Pericles make on its books to adjust for the unrealized gain from this transaction on 12/31/X5?
2. What worksheet entry(ies) would Pericles make to consolidate on this date on 12/31/X5?
Solution 6: Subsequent Years
Requirement 1:Pericles will continue to extinguish $6,000 (1/5) of the unrealized gain each year to its equity accounts.
Investment in Sub 6,000Income from Sub 6,000
Equity Method Entry for all Subsequent Years:
Solution 6: Subsequent Years
Requirement 1:Pericles will continue to extinguish $6,000 (1/5) of the unrealized gain each year to its equity accounts.
Investment in Sub 6,000Income from Sub 6,000
Equity Method Entry for all Subsequent Years:
Requirement 1:Pericles will continue to extinguish $6,000 (1/5) of the unrealized gain each year to its equity accounts.
Investment in Sub 6,000Income from Sub 6,000
Equity Method Entry for all Subsequent Years:
Solution 6: Subsequent Years
Investment in Sub 18,000Equipment 30,000
Accumulated Depreciation 48,000
Accumulated Depreciation 6,000 Depreciation Expense 6,000
20X6 Worksheet Entries:
Investment in Sub 12,000Equipment 30,000
Accumulated Depreciation 42,000
Accumulated Depreciation 6,000 Depreciation Expense 6,000
20X7 Worksheet Entries:
Investment in Sub 6,000Equipment 30,000
Accumulated Depreciation 36,000
Accumulated Depreciation 6,000 Depreciation Expense 6,000
20X8 Worksheet Entries:
Parent 120,000
Parent 120,000
Sub 90,000
Parent 120,000
Equipment
Sub 90,000 30,000
Accumulated Depreciation
54,000 48,000
96,000“As if”
“Actual” 6,000
Equipment
Sub 90,000 30,000
Accumulated Depreciation
72,000 42,000
108,000“As if”
“Actual” 6,000
Equipment
30,000
Accumulated Depreciation
90,000 36,000
120,000“As if”
“Actual” 6,000
Solution 6: Subsequent Years
Consolidation Worksheet—20X6
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Depreciation Expense 18,000 6,000 12,000
Balance Sheet Equipment 90,000 30,000 120,000
Accumulated Depreciation 54,000 6,000 48,000 96,000
Investment in Sub XXX 18,000 Basic 0
Consolidation Worksheet—20X7
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Depreciation Expense 18,000 6,000 12,000
Balance Sheet Equipment 90,000 30,000 120,000
Accumulated Depreciation 72,000 6,000 42,000 108,000
Investment in Sub XXX 12,000 Basic 0
Consolidation Worksheet—20X8
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Depreciation Expense 18,000 6,000 12,000
Balance Sheet Equipment 90,000 30,000 120,000
Accumulated Depreciation 90,000 6,000 36,000 120,000
Investment in Sub XXX 6,000 Basic 0
Learning Objective 6
Prepare equity-method journal entries and elimination entries for the consolidation of a subsidiary
following an upstream depreciable asset
transfer.
Example 7: Upstream with Partial Ownership Depreciable Asset Transfer
On 1/1/X6, Snoopy (an 85%-owned subsidiary of Peanut) sold equipment costing $150,000 to Peanut for $90,000. At the time of the sale, the equipment had accumulated depreciation of $110,000. Peanut continued depreciating the equipment using the straight-line method and assigned a remaining useful life of five years.
Note: Transfer is on first day of the year.
Required:1.What journal entry would Peanut make on its
books each year to adjust for the unrealizedgain from this transaction?
2.What worksheet entry would Peanut make eachyear to consolidate on this date?
P
S
NCI
15%
85%
Example 5 Computations
Sale:Proceeds $90,000 Book Value 40,000Unrealized Gain $ 50,000
Equipment Accumulated Depreciation150,000 110,000
Book Value = 40,000
Example 7 ComputationsPeanut
Snoopy
NCI
15% 85%Sale:Proceeds $90,000 Book Value 40,000Unrealized Gain $ 50,000
Gain = 50,000 5 = 10,000 Extra Depreciation
Book Value = 40,000 5 = 8,000 Sub Depreciation
18,000 Total Depreciation
85%
Solution: Peanut Company Equity Method Journal EntriesInvestment in Snoopy Income from Snoopy
8,500Defer Gain
8,500 42,500 42,500
Extra Depr.
Year 1 Income from Snoopy 42,500Investment in Snoopy 42,500
Investment in Snoopy 8,500Income from Snoopy 8,500
Solution: Peanut Company Equity Method Journal Entries
Year 2 Investment in Snoopy 8,500Income from Snoopy 8,500
Year 3 Investment in Snoopy 8,500Income from Snoopy 8,500
Year 4 Investment in Snoopy 8,500Income from Snoopy 8,500
Year 5 Investment in Snoopy 8,500Income from Snoopy 8,500
Worksheet EntriesYear 1
Equipment Accumulated DepreciationPeanut 90,000
60,000
Gain on Sale 50,000Equipment 60,000
Accumulated Depreciation 110,000
Accumulated Depreciation 10,000Depreciation Expense 10,000
“Actual” 18,000
Snoopy 150,000 “As if”
10,000 110,000
118,000
Worksheet EntriesYear 2
Equipment Accumulated DepreciationPeanut 90,000
60,000
Investment in Snoopy 34,000NCI in NA of Snoopy 6,000Equipment 60,000
Accumulated Depreciation 100,000
Accumulated Depreciation 10,000Depreciation Expense 10,000
36,000
Snoopy 150,000
10,000 100,000
126,000
“Actual”
“As if”
Worksheet EntriesYear 3
Equipment Accumulated DepreciationPeanut 90,000
60,000
Investment in Snoopy 25,500NCI in NA of Snoopy 4,500Equipment 60,000
Accumulated Depreciation 90,000
Accumulated Depreciation 10,000Depreciation Expense 10,000
54,000
Snoopy 150,000
10,000 90,000
134,000
“Actual”
“As if”
Worksheet EntriesYear 4
Equipment Accumulated DepreciationPeanut 90,000
Investment in Snoopy 17,000NCI in NA of Snoopy 3,000Equipment 60,000
Accumulated Depreciation 80,000
Accumulated Depreciation 10,000Depreciation Expense 10,000
72,000
Snoopy 150,000 142,000
60,000 10,000 80,000
“Actual”
“As if”
Worksheet EntriesYear 5
Equipment Accumulated DepreciationPeanut 90,000
Investment in Snoopy 8,500NCI in NA of Snoopy 1,500Equipment 60,000
Accumulated Depreciation 70,000
Accumulated Depreciation 10,000Depreciation Expense 10,000
90,000
Snoopy 150,000 150,000
60,000 10,000 70,000
“Actual”
“As if”
Consolidation Worksheet—Year 1
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Gain on Sale 50,000 50,000 0
Depreciation Expense 18,000 10,000 8,000
Balance Sheet Equipment 90,000 60,000 150,000
Accumulated Depreciation 18,000 10,000 110,000 118,000
Consolidation Worksheet—Year 2
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Depreciation Expense 18,000 10,000 8,000
Balance Sheet Equipment 90,000 60,000 150,000
Accumulated Depreciation 36,000 10,000 100,000 126,000
Investment in Snoopy XXX 34,000 Basic 0
NCI in NA of Snoopy 6,000 XXX
Consolidation Worksheet—Year 3
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Depreciation Expense 18,000 10,000 8,000
Balance Sheet Equipment 90,000 60,000 150,000
Accumulated Depreciation 54,000 10,000 90,000 134,000
Investment in Snoopy XXX 25,500 Basic 0
NCI in NA of Snoopy 4,500 XXX
Consolidation Worksheet—Year 4
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Depreciation Expense 18,000 10,000 8,000
Balance Sheet Equipment 90,000 60,000 150,000
Accumulated Depreciation 72,000 10,000 80,000 142,000
Investment in Snoopy XXX 17,000 Basic 0
NCI in NA of Snoopy 3,000 XXX
Consolidation Worksheet—Year 5
Adjustments
Parent Sub DR CRConsol-idated
Income Statement Depreciation Expense 18,000 10,000 8,000
Balance Sheet Equipment 90,000 60,000 150,000
Accumulated Depreciation 90,000 10,000 70,000 150,000
Investment in Snoopy XXX 8,500 Basic 0
NCI in NA of Snoopy 1,500 XXX
Intercompany Transfers of Amortizable Assets• Accounting for intangible assets usually differs
from accounting for tangible assets in that amortizable intangibles normally are reported at the remaining unamortized balance without the use of a contra account.
• Other than netting the accumulated amortization on an intangible asset against the asset cost, the intercompany sale of intangibles is treated the same in consolidation as the intercompany sale of tangible assets.
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