finance cost- group account

This topic has 3 replies, 2 voices, and was last updated 7 years ago by P2-D2.

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October 30, 2018 at 6:20 pm #480260
adarsh1997
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Hello Chris,

When a parent has given the sub a loan, what effect does the interest cost has on NCI?
From what I know, the finance cost(for the sub) and investment income(for the parent) need to be reduced? But do we need to give the NCI share of the finance cost?

Thanks.
October 30, 2018 at 8:50 pm #480273
P2-D2
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Hi,

The interest expense in the subsidiary will reduce the profits and therefore the NCI. The removal of the intra-group interest is then dealt with separately and eliminated in the consolidation column of our working.

Thanks
October 31, 2018 at 7:26 am #480312
adarsh1997
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Hello Chris,

Thank you for the answer.

What effect does the finance costs/investment income have on the consolidated retained earnings(working 3)? Do we need to increase reduce the parent’s retained earnings because we’ve reduced investment income and increase the sub RE because we’ve reduced finance cost?

Thanks
November 3, 2018 at 7:04 am #483629
P2-D2
Keymaster
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Hi,

The interest income is still part of P’s profits in its financial statements, so would also form part of its retained earning in the group retained earnings calculation.

Thanks
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