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IAI CAFB - Certificate in Accounting, Finance and Business study materials
IAI CAFB - Certificate in Accounting, Finance and Business study resources

IAI CAFB - Certificate in Accounting, Finance and Business practice questions

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Question 1Financial Accounting and Reporting

Under the accrual basis of accounting, when should revenue from a credit sale of goods be recognised?

  1. When the order is received from the customer
  2. When the invoice is formally issued by the seller
  3. When the goods are delivered and control passes to the buyer Correct answer.
  4. When the customer pays the invoice

Explanation

Accrual accounting recognises revenue when the performance obligation is satisfied, which for a sale of goods is normally when control transfers to the buyer, regardless of when cash is received. Issuing an invoice is an administrative act and does not by itself determine the timing of recognition.

Question 2Financial Accounting and Reporting

A business pays an annual insurance premium of 12,000 in advance on 1 April. Its year end is 31 December. What is the prepayment reported in the statement of financial position at year end?

  1. 3,000 Correct answer.
  2. 12,000
  3. 9,000
  4. 0

Explanation

Nine months of cover (April to December) has expired and is an expense, leaving three months (January to March) unused. Three-twelfths of 12,000 equals 3,000, which is carried forward as a prepayment asset.

Question 3Financial Accounting and Reporting

Which of the following best describes the going concern assumption in financial reporting?

  1. Assets are always measured at their current market value
  2. Every transaction is recorded at its original cost
  3. Revenue is recognised only when cash is received
  4. The entity is expected to continue operating for the foreseeable future Correct answer.

Explanation

Going concern means the financial statements are prepared on the basis that the entity will continue in operation for the foreseeable future, without intention or necessity to liquidate. If the assumption fails, a different basis such as break-up value must be used.

Question 4Financial Accounting and Reporting

A company issues 100,000 ordinary shares with a nominal value of 1 each at a price of 2.50 per share. How should the excess over nominal value be recorded?

  1. As revenue in the statement of profit or loss
  2. As a direct reduction of retained earnings
  3. As a liability for the amount due to shareholders
  4. In a share premium account within equity Correct answer.

Explanation

The excess of issue proceeds over nominal value is share premium, presented within equity and not treated as income. Only the nominal amount is credited to share capital.

Question 5Financial Accounting and Reporting

Which statement is correct about the effect of a credit purchase of inventory on the accounting equation?

  1. Assets increase and assets decrease
  2. Assets increase and equity increases
  3. Assets increase and liabilities increase Correct answer.
  4. Liabilities increase and equity decreases

Explanation

Inventory, an asset, increases, and the amount owed to the supplier, a liability, increases by the same amount. Equity is unaffected at the point of purchase because no profit or loss has arisen.

Question 6Financial Accounting and Reporting

Which of the following is an example of a non-current liability?

  1. Accrued wages payable next month
  2. Trade payables due in 30 days
  3. Bank overdraft repayable on demand
  4. A ten-year debenture repayable in 2031 Correct answer.

Explanation

A liability is classified as non-current when the entity has an unconditional right to defer settlement for more than twelve months after the reporting date. A ten-year debenture meets that condition.

Question 7Financial Accounting and Reporting

A machine costing 50,000 with no residual value is depreciated on a straight-line basis over 5 years. What is the carrying amount after the third full year?

  1. 40,000
  2. 30,000
  3. 10,000
  4. 20,000 Correct answer.

Explanation

Annual depreciation is 50,000 divided by 5, which is 10,000. After three years accumulated depreciation is 30,000, leaving a carrying amount of 20,000.

Question 8Financial Accounting and Reporting

Which qualitative characteristic requires financial information to be capable of making a difference to users' decisions?

  1. Relevance Correct answer.
  2. Verifiability
  3. Comparability
  4. Timeliness

Explanation

Relevance is the fundamental qualitative characteristic under which information must be capable of making a difference in users' decisions, through predictive or confirmatory value and materiality. Timeliness and comparability are enhancing characteristics that support useful information.

Question 9Financial Accounting and Reporting

A trader's trial balance shows total debits of 84,600 and total credits of 84,150. Which error could explain the 450 difference?

  1. A sale of 450 was completely omitted from the books
  2. A payment of 450 to a supplier was debited to the supplier account and credited to cash
  3. A cash sale of 450 was correctly entered in the cash book only Correct answer.
  4. A purchase of 450 was recorded as 540 in both accounts

Explanation

An unequal trial balance means a one-sided or arithmetically unbalanced entry exists. Posting a cash sale receipt to the cash book without the corresponding credit to sales leaves debits exceeding credits by 450.

Question 10Financial Accounting and Reporting

Under IFRS, which cost is excluded from the initial measurement of property, plant and equipment?

  1. Estimated dismantling costs recognised as a provision
  2. The purchase price net of trade discounts
  3. Directly attributable installation costs
  4. Initial operating losses incurred while demand builds up Correct answer.

Explanation

Initial operating losses and costs of relocating or reorganising operations are not costs of bringing the asset to its location and condition, so they are expensed. Purchase price, directly attributable costs and the discounted dismantling obligation are capitalised.

Question 11Financial Accounting and Reporting

Inventory costing 8,000 is damaged and can be sold for 5,200 after incurring selling costs of 700. What is the net realisable value used for measurement?

  1. 8,000
  2. 4,500 Correct answer.
  3. 5,900
  4. 5,200

Explanation

Net realisable value is the estimated selling price less the estimated costs of completion and sale, so 5,200 minus 700 equals 4,500. Inventory is carried at the lower of cost and net realisable value, so a write-down of 3,500 is required.

Question 12Financial Accounting and Reporting

A company has profit before tax of 200,000 and a tax rate of 25%. It also has a taxable temporary difference of 40,000 relating to accelerated tax depreciation. What is the deferred tax liability to be recognised?

  1. 10,000 Correct answer.
  2. 0
  3. 50,000
  4. 40,000

Explanation

A taxable temporary difference arises where tax depreciation exceeds accounting depreciation, creating a future tax obligation. Applying the 25% rate to 40,000 gives a deferred tax liability of 10,000.

Question 13Financial Accounting and Reporting

Which item is presented within other comprehensive income rather than in profit or loss?

  1. Depreciation of factory machinery
  2. Revaluation surplus on property, plant and equipment Correct answer.
  3. Cost of goods sold
  4. Interest expense on a bank loan

Explanation

A revaluation surplus recognised under the revaluation model is taken to other comprehensive income and accumulated in equity as a revaluation reserve. It is not recycled through profit or loss on the initial revaluation.

Question 14Financial Accounting and Reporting

An entity sells goods on credit for 20,000, offering a 2% early settlement discount if paid within 10 days. Under IFRS 15, how is revenue initially measured when the customer is expected to take the discount?

  1. 20,000, with the discount expensed if taken
  2. 20,000, with a provision for the discount
  3. 19,600, using the expected consideration Correct answer.
  4. 19,600 only if the customer actually pays early

Explanation

IFRS 15 requires revenue to be measured at the amount of consideration to which the entity expects to be entitled, so a discount expected to be taken reduces revenue at inception. The variable consideration is estimated and constrained, giving 19,600.

Question 15Financial Accounting and Reporting

A company has current assets of 90,000, inventory of 30,000 and current liabilities of 45,000. What is the quick (acid-test) ratio?

  1. 0.67
  2. 2.00
  3. 1.50
  4. 1.33 Correct answer.

Explanation

The quick ratio excludes inventory from current assets, giving 90,000 minus 30,000 equals 60,000, divided by current liabilities of 45,000, which equals 1.33. It measures the ability to meet short-term obligations without selling inventory.

Question 16Financial Accounting and Reporting

Which of the following is treated as a non-adjusting event after the reporting period under IAS 10?

  1. A decline in the market value of investments that occurred before the year end
  2. Settlement of a court case confirming a present obligation at the year end
  3. The bankruptcy of a major customer whose receivable existed at the year end
  4. A major fire destroying a factory after the year end Correct answer.

Explanation

Non-adjusting events are those arising after the reporting period that do not concern conditions existing at the reporting date. A fire destroying a factory after year end is such an event and is disclosed if material, without adjusting the figures.

Question 17Financial Accounting and Reporting

A sole trader takes goods costing 600 from inventory for personal use. What is the correct double entry?

  1. Dr Drawings 600, Cr Cash 600
  2. Dr Drawings 600, Cr Purchases 600 Correct answer.
  3. Dr Purchases 600, Cr Drawings 600
  4. Dr Inventory 600, Cr Drawings 600

Explanation

Goods withdrawn for personal use are drawings, reducing the cost of goods available for sale. The entry debits drawings and credits purchases (or inventory) at cost.

Question 18Financial Accounting and Reporting

A company issues a 100,000 zero-coupon bond at a discount, raising proceeds of 78,000. Under amortised cost, how is the difference of 22,000 treated?

  1. Recognised as a reduction of share capital
  2. Recognised as finance cost over the life of the bond Correct answer.
  3. Recognised as a prepayment asset
  4. Recognised immediately as a loss on issue

Explanation

The bond is initially measured at proceeds and subsequently at amortised cost using the effective interest method. The discount of 22,000 represents interest and is recognised as a finance cost over the bond's term.

Question 19Financial Accounting and Reporting

A parent owns 80% of a subsidiary. The subsidiary reports profit after tax of 50,000. What amount is attributed to non-controlling interests?

  1. 0
  2. 50,000
  3. 10,000 Correct answer.
  4. 40,000

Explanation

Non-controlling interests share in the subsidiary's profit in proportion to their ownership, which is 20% of 50,000, equal to 10,000. This amount is presented separately in the consolidated statement of profit or loss.

Question 20Financial Accounting and Reporting

Which of the following best describes the purpose of the statement of cash flows?

  1. To disclose the fair value of all assets and liabilities
  2. To present the entity's equity attributable to owners
  3. To reconcile the opening and closing balances of cash and cash equivalents Correct answer.
  4. To show the profit earned from trading operations

Explanation

The statement of cash flows explains movements in cash and cash equivalents during the period, classified into operating, investing and financing activities. It complements the statement of profit or loss because profit and cash flow differ.

Question 21Financial Accounting and Reporting

A company has profit before tax of 500,000. Depreciation was 60,000, an increase in trade receivables was 40,000 and a decrease in trade payables was 25,000. What is the net cash from operating activities before tax?

  1. 545,000
  2. 495,000 Correct answer.
  3. 475,000
  4. 505,000

Explanation

Starting with profit before tax of 500,000, add back non-cash depreciation of 60,000, deduct the increase in receivables of 40,000 and deduct the decrease in payables of 25,000. The result is 495,000.

Question 22Financial Accounting and Reporting

An entity leases equipment for five years with annual payments of 10,000 in arrears. The interest rate implicit in the lease is 5%, giving a present value of the payments of 43,295. What liability is recognised at commencement under IFRS 16?

  1. 50,000
  2. 43,295 Correct answer.
  3. 0, because it is an operating lease
  4. 10,000

Explanation

IFRS 16 requires a lessee to recognise a lease liability at the present value of future lease payments discounted at the interest rate implicit in the lease. That present value is 43,295, with a corresponding right-of-use asset.

Question 23Financial Accounting and Reporting

A company's inventory turnover is 4 times per year, and average inventory is 75,000. What is the cost of goods sold for the year?

  1. 300,000 Correct answer.
  2. 18,750
  3. 75,000
  4. 150,000

Explanation

Inventory turnover equals cost of goods sold divided by average inventory. Rearranging gives cost of goods sold equal to 4 multiplied by 75,000, which is 300,000.

Question 24Financial Accounting and Reporting

Under IAS 36, at what amount is an impaired asset measured when its carrying amount exceeds the higher of fair value less costs of disposal and value in use?

  1. Its historical cost
  2. The recoverable amount, being the higher of the two measures Correct answer.
  3. Its value in use
  4. Its fair value less costs of disposal in all cases

Explanation

Recoverable amount is defined as the higher of fair value less costs of disposal and value in use. An impairment loss is recognised when carrying amount exceeds recoverable amount, and the asset is written down to recoverable amount.

Question 25Financial Accounting and Reporting

An entity has a defined benefit obligation with a present value of 800,000 and plan assets with a fair value of 750,000. Actuarial losses of 30,000 arise during the year. Under IAS 19, how are the actuarial losses treated?

  1. Recognised immediately in profit or loss
  2. Deferred and amortised over the average remaining service life
  3. Recognised as an adjustment to the opening retained earnings only
  4. Recognised in other comprehensive income and not reclassified to profit or loss Correct answer.

Explanation

IAS 19 requires remeasurements of the net defined benefit liability, including actuarial gains and losses, to be recognised in other comprehensive income. They are not subsequently recycled to profit or loss.

Question 26Financial Accounting and Reporting

Under the IASB Conceptual Framework, which element is defined as a present economic resource controlled by the entity as a result of past events?

  1. Income
  2. A liability
  3. An asset Correct answer.
  4. Equity

Explanation

The Conceptual Framework defines an asset as a present economic resource controlled by the entity as a result of past events, with the resource being a right that has the potential to produce economic benefits. Control, not legal ownership, is the decisive feature, so leased or consigned items can qualify.

Question 27Financial Accounting and Reporting

A business receives a bank loan of 30,000. Which double entry records this transaction?

  1. Debit loan liability 30,000; credit bank 30,000
  2. Debit expenses 30,000; credit bank 30,000
  3. Debit bank 30,000; credit loan liability 30,000 Correct answer.
  4. Debit bank 30,000; credit capital 30,000

Explanation

Receiving loan proceeds increases the bank asset, so bank is debited, and it creates an obligation to repay, so the loan liability account is credited. Debits record increases in assets and credits record increases in liabilities.

Question 28Financial Accounting and Reporting

Which statement about the accrual basis of accounting is correct?

  1. Expenses are recognised only when the supplier is paid
  2. It is permitted only for entities without inventory
  3. Transactions are recorded when the underlying event occurs, not when cash moves Correct answer.
  4. Revenue is recognised only when cash is received from the customer

Explanation

Under the accrual basis, the effects of transactions are recognised in the periods in which they occur, regardless of the timing of related cash flows. This is why receivables, payables, accruals and prepayments exist to align income and expenses with the period they relate to.

Question 29Financial Accounting and Reporting

An entity pays 12,000 in advance on 1 October for 12 months of insurance cover. At 31 December, what amount is reported as a prepayment?

  1. 0
  2. 12,000
  3. 9,000 Correct answer.
  4. 3,000

Explanation

Three months of cover (October to December) has expired, so 3,000 is expensed and the remaining nine months, 9,000, is carried forward as a prepayment. A prepayment is an asset representing benefits to be consumed in future periods.

Question 30Financial Accounting and Reporting

Which statement correctly describes the effect of a credit sale made on 30-day terms?

  1. Assets are unchanged until cash is received
  2. Assets increase and liabilities increase
  3. Equity increases only when the customer pays
  4. Assets and equity both increase at the point of sale Correct answer.

Explanation

Under accrual accounting a credit sale recognises revenue and a corresponding trade receivable, so total assets rise and, because revenue increases profit, equity rises too. No liability arises from a sale on credit.

Question 31Financial Accounting and Reporting

Which document is sent by a supplier to a customer to correct an overcharge on a previously issued invoice?

  1. A purchase order
  2. A credit note Correct answer.
  3. A remittance advice
  4. A debit note

Explanation

A credit note reduces the amount previously invoiced and is issued by the seller when goods are returned or the original invoice was overstated. It acts as a negative invoice and supports the adjustment in both parties' records.

Question 32Financial Accounting and Reporting

A business has opening capital of 40,000, profit for the year of 15,000 and drawings of 6,000. What is closing capital?

  1. 49,000 Correct answer.
  2. 61,000
  3. 55,000
  4. 34,000

Explanation

Closing capital equals opening capital plus profit less drawings: 40,000 + 15,000 − 6,000 = 49,000. Profit increases the owner's interest while drawings reduce it.

Question 33Financial Accounting and Reporting

Which of the following is an internal user of an entity's general-purpose financial statements?

  1. A supplier deciding on credit terms
  2. A member of the entity's board of directors Correct answer.
  3. A tax authority conducting an assessment
  4. A bank assessing a loan application

Explanation

Internal users work within the entity and use financial information for planning, control and decision-making; directors and management fall in this group. Banks, tax authorities and suppliers are external users with no direct access to internal records.

Question 34Financial Accounting and Reporting

An entity's trial balance balances, yet a payment of 2,500 for rent was posted to the rent account as 250 and to bank as 250. What type of error has occurred?

  1. An error of omission
  2. An error of principle
  3. A compensating error
  4. An error of original entry Correct answer.

Explanation

An error of original entry arises when an incorrect amount is entered in the books and then posted consistently to both accounts, so the trial balance still balances. Here the same wrong figure, 250, was used on both sides.

Question 35Financial Accounting and Reporting

An entity's bank statement shows a balance of 5,400, while its cash book shows 5,900. Unpresented cheques total 800 and there are no other differences. What is the balance shown on the bank statement before any adjustment?

  1. 5,400 Correct answer.
  2. 6,700
  3. 4,600
  4. 5,900

Explanation

The bank statement balance of 5,400 is given directly in the question, so the reconciliation confirms the relationship: cash book 5,900 less unpresented cheques 800 equals 5,100, which would not match. Since the stated statement balance is 5,400, that figure is the answer sought, and the difference of 500 signals an unrecorded item requiring investigation.

Question 36Financial Accounting and Reporting

Goods costing 900 were returned by a credit customer. Which entry records this in the seller's books?

  1. Debit sales returns; credit trade receivables Correct answer.
  2. Debit sales; credit inventory
  3. Debit purchases returns; credit trade payables
  4. Debit trade receivables; credit sales returns

Explanation

A sales return reduces the amount owed by the customer, so trade receivables is credited, and the returns account is debited to reduce net revenue. Sales returns is a contra-revenue account presented against sales.

Question 37Financial Accounting and Reporting

An entity has opening inventory of 18,000, purchases of 92,000, closing inventory of 22,000 and sales of 150,000. What is the gross profit?

  1. 66,000
  2. 62,000 Correct answer.
  3. 58,000
  4. 88,000

Explanation

Cost of sales is opening inventory 18,000 + purchases 92,000 − closing inventory 22,000 = 88,000. Gross profit is sales 150,000 − 88,000 = 62,000.

Question 38Financial Accounting and Reporting

Which cost is capitalised as part of the cost of a self-constructed item of plant under IAS 16?

  1. General staff training on how to operate the plant
  2. Costs of relocating the plant after it is ready for use
  3. Directly attributable labour and material costs of construction Correct answer.
  4. Abnormal wasted material caused by poor planning

Explanation

IAS 16 requires directly attributable costs of bringing an asset to the location and condition necessary for intended use to be capitalised, including construction labour and materials. Abnormal waste, training and relocation after the asset is ready for use are expensed.

Question 39Financial Accounting and Reporting

An entity uses the revaluation model for a building with a carrying amount of 400,000 and a fair value of 460,000. There is no previous revaluation surplus. How is the increase treated?

  1. Recognised as a reduction in the deferred tax liability only
  2. Recognised in other comprehensive income and accumulated in equity Correct answer.
  3. Recognised in profit or loss over the remaining useful life
  4. Recognised immediately in profit or loss as a gain

Explanation

Under IAS 16, an increase in carrying amount on revaluation is recognised in other comprehensive income and accumulated in equity under the heading revaluation surplus. It is not recognised in profit or loss unless it reverses a previous revaluation decrease.

Question 40Financial Accounting and Reporting

Under IAS 38, which expenditure on an internally generated intangible asset must be expensed?

  1. Directly attributable costs of testing a completed prototype
  2. Research phase expenditure Correct answer.
  3. Development costs that meet all capitalisation criteria
  4. Legal registration fees for a successfully developed patent

Explanation

IAS 38 prohibits capitalising research expenditure because no intangible asset can be demonstrated at that stage, so it is expensed as incurred. Development expenditure may be capitalised only when all the specified criteria are met.

Question 41Financial Accounting and Reporting

An entity holds inventory that cost 15,000. Its current selling price is 16,000, but it needs 2,000 of modification before sale and 500 of selling costs. What is the inventory's measurement under IAS 2?

  1. 16,000
  2. 15,000
  3. 13,500 Correct answer.
  4. 13,000

Explanation

Inventory is measured at the lower of cost and net realisable value. NRV is 16,000 − 2,000 − 500 = 13,500, which is below cost of 15,000, so the write-down to 13,500 is required.

Question 42Financial Accounting and Reporting

A company reports earnings before interest and tax of 90,000, interest expense of 10,000 and a tax rate of 25%. What is the profit for the year?

  1. 67,500
  2. 60,000 Correct answer.
  3. 75,000
  4. 80,000

Explanation

Profit before tax is 90,000 − 10,000 = 80,000, and tax at 25% is 20,000, giving profit for the year of 60,000. Interest is deducted before tax is computed.

Question 43Financial Accounting and Reporting

Under IAS 7, how is interest paid classified for an entity that presents operating activities using the indirect method?

  1. As an operating cash flow, or as a financing cash flow if consistently applied Correct answer.
  2. Always as an investing cash flow
  3. Always excluded from the statement of cash flows
  4. As a non-cash item disclosed only in the notes

Explanation

IAS 7 permits interest paid to be classified as an operating cash flow or as a financing cash flow, provided the choice is applied consistently. Because it is a cash flow, it must appear in the statement rather than only in the notes.

Question 44Financial Accounting and Reporting

An entity has current assets of 120,000 (including inventory of 50,000) and current liabilities of 60,000. What is the current ratio?

  1. 0.5
  2. 2.0 Correct answer.
  3. 1.5
  4. 1.17

Explanation

The current ratio is current assets divided by current liabilities: 120,000 / 60,000 = 2.0. Inventory is included in this measure, unlike the quick ratio.

Question 45Financial Accounting and Reporting

Which of the following is presented as a non-current asset in the statement of financial position?

  1. Inventory expected to be sold within the next operating cycle
  2. A machine held for use in production with a five-year remaining life Correct answer.
  3. Prepaid rent for the next quarter
  4. A trade receivable due in 45 days

Explanation

Non-current assets are those expected to be realised or consumed beyond twelve months or the entity's normal operating cycle. A production machine with a five-year remaining life falls in that category.

Question 46Financial Accounting and Reporting

An entity issues 100,000 ordinary shares of 1 each at 2.50 per share. How is the premium presented?

  1. 150,000 recognised in equity as share premium Correct answer.
  2. 150,000 recognised as revenue in profit or loss
  3. 250,000 recognised as share capital
  4. 100,000 recognised in equity and 150,000 as a liability

Explanation

Proceeds of 250,000 are split into share capital of 100,000 (the nominal value) and share premium of 150,000, both presented within equity. A share premium is a capital contribution and is never recognised as revenue.

Question 47Financial Accounting and Reporting

An entity's tax computation shows an accounting profit of 300,000 and non-deductible entertainment expenses of 20,000. The tax rate is 25%. What is the current tax charge?

  1. 80,000 Correct answer.
  2. 70,000
  3. 75,000
  4. 85,000

Explanation

Non-deductible expenses are added back to accounting profit to give taxable profit of 320,000, and tax at 25% is 80,000. Permanent differences such as disallowed entertainment affect current tax only and create no deferred tax.

Question 48Financial Accounting and Reporting

Under IFRS 15, an entity receives a 24,000 advance on 1 December for goods to be delivered on 31 March. What is reported at 31 December?

  1. Revenue of 24,000
  2. A receivable of 24,000
  3. A contract asset of 24,000
  4. A contract liability of 24,000 Correct answer.

Explanation

Because the performance obligation has not yet been satisfied, the cash received creates a contract liability representing the obligation to deliver goods in future. Revenue is recognised only when control of the goods transfers to the customer.

Question 49Financial Accounting and Reporting

An entity has a defined benefit obligation of 500,000 and plan assets of 460,000. During the year, remeasurement gains on the obligation were 30,000 and the return on plan assets was 10,000 below the amount included in net interest. How are these remeasurements presented?

  1. As a deduction from the defined benefit obligation without recognition
  2. As an adjustment to the opening retained earnings only
  3. In other comprehensive income and not reclassified to profit or loss Correct answer.
  4. In profit or loss within employee benefit expense

Explanation

IAS 19 requires remeasurements of the net defined benefit liability, including actuarial gains and losses and the difference between actual and interest income on plan assets, to be recognised in other comprehensive income. These amounts are not subsequently reclassified to profit or loss.

Question 50Financial Accounting and Reporting

A parent sells inventory to its 75%-owned subsidiary at a profit of 40,000 during the year; all the goods remain in the subsidiary's inventory at year end. What adjustment is made in the consolidated financial statements?

  1. Eliminate 10,000, being the non-controlling interest share
  2. Eliminate 30,000, being the parent's 75% share of the profit
  3. Eliminate the full 40,000 unrealised profit against inventory and group profit Correct answer.
  4. Make no adjustment because the sale was at arm's length

Explanation

Intra-group profits on goods still held by the group are unrealised and must be eliminated in full against inventory and group profit, regardless of the ownership percentage. The elimination is then allocated between the parent and non-controlling interest in the usual way.