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Dear Mike,
Q1 Dec 2010 , Loan Note 3,000 why we adjustment investment
and No adjustment Loan 6%Note?
Thank you for your HelpI can’t remember the question ….. however…..
If the loan note has been issued as part of the acquisition consideration, it has been issued the the people who were the former shareholders of the newly acquired subsidiary. So there’s nowhere to cancel it against.
If the loan was made “shortly after the acquisition to the subsidiary company” then there will be a receivable in the parent and a payable in the subsidiary and we need to cancel one against the other.
Does that answer it or must I go and look for the question?
if the subsidiary don’t register it yet.
we make adjustment on investment of Parent
and include in cost of investment
Is that ture?In either situation, it’s the parent which is issuing the loan note so it’s the parent which will record the issue.
In the second situation, the subsidiary is borrowing money from the parent. I cannot see how the subsidiary cannot have recorded the borrowing!
It MUST have debited cash so where’s the credit?
Only in the first situation would Cost of Investment be affected be affected and, in that situation, the subsidiary will NOT record the loan note – it has nothing to do with the company. The loan note will be issued to the former shareholders of the subsidiary.
In conclusion, in answer to your question, “No, it’s not ture”
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