Explain why it is necessary to adjust unrealised profit in opening inventory on consolidation.

Adjustment of unrealised profit in opening inventory:
- All worksheet adjustments made at the end of the previous financial year that affected closing retained earnings must be adjusted against opening retained earnings in the current year.
- When unrealised profits on intragroup sales of inventory are adjusted at the end of the previous year,an adjustment to opening inventory in the current year is required so that consolidated retained earnings at the commencement of the current year equals consolidated retained earnings at the end of the previous year.