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I have a problem with Parentis 2007.
“the issue of $100 10% loan note for every 500 shares acquired”… “parentis has only recorded the issue of loan notes”
A loan between a parent and a subsidiary should be eliminated on consolidation, but this one, in the SOFP it added the loans together only, under non current liabilities (120+20).. why its not like this–> 120+20-120
can anyone help please? thank you
If the question says, issue of 10% loan notes for every 500 shares acquired that means its a purchase consideration.. even then if you’re unable to recognise it whether it’s a purchase consideration or not, look for the liability recorded in Parents book, if it is then its purchase consideration and not intragroup loan.
” ….look for the liability recorded in Parents book, if it is then its purchase consideration…” ?????
WHAT?
If it’s shown as a liability in the parent’s records, the only thing we can say for sure is that it’s a liability. It MAY be a liability arising from the acquisition of the subsidiary. But equally it MAY be te parent company has borrowed money from outside on a completely different occasion than the acquisition.
Or even, after the acquisition, the parent has borrowed money from the subsidiary.
Where a parent issues a loan note, clearly you need to be careful that you understand what’s happening.
If the loan note is given to the former shareholders of the subsidiary on the event of the parent’s acquisition of the subsidiary, then it’s part of the acquisition cost and the value will feature in working 2 – the calculation of the goodwill figure.
If the loan note is created / issued after the acquisition, it may be an issue to the public generally or it could be a loan borrowed from the subsidiary.
If it’s money borrowed from the public, there is NO cancellation and the loan value will be added across to the long term debt in the subsidiary ( if applicable )
If it’s money borrowed from the subsidiary, then there will be an investment within the subsidiary’s records and a liability in the parent’s long term debts. In this situation, we DO need to effect cancellation
Is that better?
can you help me with this please? available for sale investment
june 2009 question 1(pacemaker)i cant understand why gain/loss in FV of investmentsare taken into the retained earnings working. i searched about AFS investments and it says that the gain or loss in FV are taken to OCI and not P/L…so why here the FV gain/loss is taken to the RE?
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