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I came across a practice question where a parent has hold a loan to a subsidiary that has been outstanding long before the acquisition. In the provided answer, for consolidation of the group retained earnings, the expenses on an intra-group loan is not added back to the end-of-year retained earnings of the subsidiary.
However, I think on consolidation, the interest expenses is saved and thus should be added back to the retained earnings of the subsidiary; and at the same time, the interest income of the parent should be deducted from the parent retained earnings.
Can you please help solve my doubt? thank you!
That sounds reasonable to me. Do you have a question reference so that I may check to see what the answer has done?