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John Moffat.
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- April 22, 2016 at 11:13 am #312179
Hello Sir, hope u are well.
I have 2 questions kindly explain. For part a) In the bpp answer when calculating the net amount from each country, why do they refer them as amounts to be paid by Multi Euro? Aint they receipts for the respective countries while for Singapore its extra payment for them?
In part b) one of disadvantages of netting is ” where third parties are involved,the netting arrangement may involve re-invoicing for the net amount or,in some cases, a completely new contract may be required”. what does this mean
Thanks
April 22, 2016 at 12:14 pm #312199The question says that Multidrop Europe is to be the principal in the netting, so all receipts and payments will effectively go through them.
Netting between group companies is no problem, but if you want to net with a non-group company (because you owe them and they owe you) then you can’t force them to accept the netting – especially when the amount owed to and from the non-group company my be owed to and from different companies in our group. Even assuming they do accept the idea, it may need new invoices.
Suppose A and B are in the same group. C is a non-group company.
A owes 100 to C, and C owes 150 to B. So we net and the end result is that C pays the net amount of 50 and maybe they pay it to our head office rather than to B. So the payment is of a different amount and to a different company than what was on the invoice. That is why it might need new contracts and/or new invoices. - AuthorPosts
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