Blocked funds
In international appraisal, a project may generate local cash that the parent cannot immediately receive. Value depends on the restriction's duration, permitted uses, local reinvestment returns, tax, currency risk and eventual remittance conditions. A local cash surplus and a parent remittance are different cash-flow events. Consider only lawful, feasible responses such as permitted local investment or appropriately structured future distributions; do not assume an accounting management charge can override controls. Blocked funds may retain value, but their timing and risk differ from freely transferable cash.
Worked example
An overseas project earns $1 million that must remain locally for two years. The parent cannot value it as an immediate $1 million receipt; it forecasts permitted investment and eventual net remittance and discounts those parent cash flows appropriately.
Common mistake
Ignoring a remittance restriction because the subsidiary has already recognised the profit or collected the local cash.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |