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Hello!
The question: “The investment income includes $5m interest receivable on the loan made to Strip (a sub).”
We exclude this amount from investment income, because it is incorrect to account it there. We should eliminate this as it is ico transaction, which we already did by deducting it from investment income.
Why was it also deducted from finance costs?
Thanks in advance!
Hi,
It is interest income in the books of the parent but it will also be a finance cost in the books of the subsidiary (Strip) when they pay the interest. Both need to be removed as they are intra-group and if you do not remove both then you are not posting both sides of the double entry.
Thanks
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