2.30 Upstream Transaction

An upstream transaction is a subsidiary’s sale of goods or services to its parent. To the extent that the transaction involves goods that are sold for more (less) than the subsidiary’s cost basis in such goods, a profit (loss) will be recorded in the subsidiary’s financial statements. There are two acceptable methods for eliminating profit (loss) on such sales until the parent sells the goods to a third party: the parent-only attribution method and the parent/noncontrolling interest attribution method (see Section 6.4.2). Refer to Example 6-8 for an illustration of the accounting for upstream transactions in circumstances involving noncontrolling interests.