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loan-purchase cosideration

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › loan-purchase cosideration

  • This topic has 1 reply, 2 voices, and was last updated 14 years ago by MikeLittle.
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  • November 29, 2010 at 3:28 pm #46223
    irinabodnar
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    Can you help me with treatment for loan as purchase consideration. When do we include loan in investment at cost( calculating goodwill) ?

    November 30, 2010 at 10:53 am #71470
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23323
    • ☆☆☆☆☆

    If it’s part of the amount paid to the selling shareholders ( those people from whom we are buying the shares in the subsidiary ) we calculate the value of the loan note issued ( ie, we promise to pay them so many more $s in x number of years’ time ) and include that figure in the cost of acquisition.

    An alternative is where the loan is a loan to the subsidiary – then it will be shown as an asset in the parent and a liability in the subsidiary. Simply cancel the loan asset against the loan liability, but it’s not part of the purchase consideration

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