Intercompany Profits
Companies have many different practices for pricing transfers of goods and services from one affiliate to another. Regardless of the approaches used for internal decision making and performance evaluation or for tax purposes, all intercompany profits, unless immaterial, are supposed to be eliminated when preparing consolidated financial statements until confirmed through transactions with external parties.
Required
Verizon Communications is in the telephone business, although it is larger and more diversified than many smaller telecommunications companies. How does it treat intercompany profits for consolidation?
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