This is an advanced accounting discussion prompt. I don't want a fancy answer I just want an answer that hits the main points WITHOUT making me look to smart. Here is the prompt 1. Question and prompt 2.
Prompt 1:
A fundamental constraint used in reporting accounting information is conservatism, generally speaking, when a choice is to be made the option that is least likely to overstate assets is the preferred option. Why then do we eliminate losses on intercompany transactions as well as the gains?
Prompt 2.
In the intercompany transfer of depreciable assets, it is likely that the acquiring company may be making different use of the asset than did the seller. As such, the salvage value and/or the expected useful life of the asset may be changed. Is it appropriate for the acquirer to make these changes and re-determine depreciation? What impact does this have on the consolidation process?