The parent company manufactures an energy saving product and sells it to the subsidiary (60% owned) with some mark-up cost. The subsidiary will install & place the product at the customer’s premises without any charges. The ownership of the product still remains with the subsidiary. The subsidiary will only bill the customer base on an agreed % of the energy saved each month. Please advise on how to record such business transaction in the book of the subsidiary especially on the following: 1. Is the product an inventory or non-current asset (if yes which type)? 2. The sales will be the agreed % saving billed. Is there any COS for the product? 3. Any provision of depreciation charges for installed product at the customers’ premises 4. What is the accounting entry for the installation cost (dismantling cost)? 5. Any other accounting entry is required? Thank you
