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Can you help me with treatment for loan as purchase consideration. When do we include loan in investment at cost( calculating goodwill) ?
If it’s part of the amount paid to the selling shareholders ( those people from whom we are buying the shares in the subsidiary ) we calculate the value of the loan note issued ( ie, we promise to pay them so many more $s in x number of years’ time ) and include that figure in the cost of acquisition.
An alternative is where the loan is a loan to the subsidiary – then it will be shown as an asset in the parent and a liability in the subsidiary. Simply cancel the loan asset against the loan liability, but it’s not part of the purchase consideration
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