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The loan notes given of $15million as consideration, why is it included in the consolidated statement? Should it not be cancelled with the investment item on individual statement of the parent. However in the answers, the loan is included in consolidation, which shows the group is providing loan to itself
Also, shouldnt the loan interest paid of 300 be cancelled?
Hi,
When the loan notes are issue we would DR Investment CR Loan notes in the parent’s books. The investment entry is cancelled on consolidation as usual as we replace it with the assets/liabilities of the subsidiary.
There is no elimination of the loan notes as they are not intra-group as they have been issued to external parties, i.e. to whoever we acquired the subsidiary from.
Thanks
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