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Im stuck in these questions when it comes to the inter-company loans.
in Highmoor they say
Quote:Included in Highmoors investments is a loan of 50 mill made to Slowmoor on 1 Apr 2003. On 28 Sept 2003, Slowmoor paid 9 mill to Highmoor. This represented 4 mill for the year interest and the balance was cap repayment. Highmoor had not received nor accounted for the payment, but it had accrued for the loan interest receivable as part of its accounts receivable figure.In Highveldt
Quote:Included in Highveldts investments is a loan of 600 mill made to samson at the start of acq. Interest is payable annualy in arrears. Samson paid the interest due for the year on 31st march 2005, but highveldt did not receive this until after the year end. Highveldt has nto accounted for the accrued interest from Samson.Now in the 1st question they have just subtracted the interest from the receivables balance but in the 2nd one they have added the interest to the Group Retained earnings?
Could anyone explain how its done when theres interest to deal with like this?Thanx 🙂
yeah,the answer is right,because we only eliminate the intra-group transaction ,the first question seem like to have 6 months NON-GROUP transaction,which is seperated from the group.so just treat it as usual.Now,can u figure the secound out?best wishes and good luck for u @14 July
Both answers are right… The difference b/w both answers is the requirement asked in question. In “Highmoor”, CSFP is required, while in “Highveldt”, only Goodwill, Group Reserves, and NCI is required.
In “Highmoor”, the intrest income has already been recorded by the parent, so no need of further addition in group reserves. Whereas, in 2nd question, interest has not been recorded, therefore it will added to Group reserves.
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