How to calculate group realized/unrealized margin?

Miklos_Hollender

I am looking for a concept, not for a technical solution, I can sort that out.

Company A has subsidiary B. Company A buys stuff at €150, sells it to B at €200, then A has unrealized margin of €50. It is because it is not yet sold to a real i.e. external customer, it is not a real sales. But when company B sells half of it to an external customer then beside the margin realized by B we can also consider half of the margin at A realized, €25.

Does it even a meaningful concept? What speaks against it?

How would you resolve it logically (not technically)? Consider everything invoiced from A to B unrealized, thensSimply look at everything sold at B to external customers, and then compare its unit cost in B to the unit cost in A and consider it a realized margin in A? The big question is how to match it? How to know that from the say €700K sold/unrealized last month this month €400K was realized? I think it would require some very complex FIFO logic.

Chinmoy

Though I am not an expert, I think that if items are sold (through a Sales Invoice) to Company B, it is anyways a realized gain / profit to Company A considering financial disclosures individually (even if Company B is a subsidiary of Company A). Isn't that true?

And, if you do not raise a Sales Invoice to Company B, instead treat that as another location and transfer the items to that location and finally sell them off from there. Will this offer any advantage to handle the situation you are in?

Chn