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How do we account for Operating Lease, Finance Lease and Loans “Provided” between Parent and Subsidiary?
In Profit and Loss Statement, the operating lease, finance charge and Interest received (from both Finance lease and Loans) will be eliminated from the Consolidation P&L Stmt?
And how do we account for in the Consolidation Stmt of Financial Position?
For an operating lease situation, the rental payment will cancel on consolidation with the operating lease rental income. The asset itself was never taken out of the lessor’s records so, on consolidation, that asset will simply cross-add into the CSoFP
For a finance lease, the asset is in the records of the lessee at depreciated fair value. If we were to reverse the transaction, it would revert back to the lessor at depreciated fair value! There’s a possibility that fair value on the inception of the lease was above the original cost less accumulated depreciation so we could need an adjustment for the pup
Loans lent and borrowed? Cancel interest income against interest expense. On CSoFP again the lending and borrowing cancel $ for $
OK?
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