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when a subsidiary has paid lnterest on loan advance by the Parent company how is it treated when consolidating financial statements?
The parent will be showing it as sundry income and the subsidiary will be showing it as a finance cost. On consolidation, cancel the amount of the interest which has been paid (or accrued as payable) against the same amount shown as received (or accrued as receivable)
If the only loan borrowed by the subsidiary is from the parent and if the only amount lent by the parent is to the subsidiary, then the cancellation exercise will eliminate all the finance cost from the subsidiary and all the finance income in the parent – there will be neither finance income nor expense in the consolidated statement of financial position
OK?
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