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Explain the required IFRS financial reporting treatment

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Question - On 1 January 2019 Regina Ltd and Twin Ltd, an unrelated company, each subscribed for half of Sugar Ltd's 100,000 $1 ordinary shares on Sugar Ltd's incorporation. A contract between Regina Ltd and Twin Ltd gives them equal profit shares and states that unanimous consent is required for all key operating decisions.

Sugar Ltd made a profit for the six months ended 30 June 2019 of $15,600. In June 2019 Regina Ltd made sales of $5,000 to Sugar Ltd, at a mark-up of 25%. Sugar Ltd still held all these goods in inventories at 30 June 2019. Regina Ltd recognised its cost of investment in Sugar Ltd of $50,000 in current assets, but made no further accounting entries, other than to record the sale of the goods.

Explain the required IFRS financial reporting treatment of the above in the financial statements of each company. Submit relevant calculations and set out the required adjustments in the form of journal entries.

Reference no: EM132616316

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