Interest-free loans or loans at below-market interest rate

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Leo
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Interest-free loans or loans at below-market interest rate

Post by Leo »

Hi,

When the fair value of an intercompany loan is different compared to the carrying amount, the difference is considered as a capital contribution if it's under common control. This applies when the parent wholly own the sub.

What happens if the there are a bunch of shareholders but none of them has control over sub ? or one or two of them ?

Thanks
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Marek Muc
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Re: Interest-free loans or loans at below-market interest rate

Post by Marek Muc »

Leo wrote: 01 Dec 2022, 16:23 This applies when the parent wholly own the sub.
Why do you think it applies to wholly owned subsidiaries only?
Leo
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Re: Interest-free loans or loans at below-market interest rate

Post by Leo »

To be honest, the wording used in IFRS, is "Parent". I guess that a shareholder with 0.0001% of the shares is not a parent ?

So if it's not a parent, is not wholly owned is isn't it ?
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Marek Muc
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Re: Interest-free loans or loans at below-market interest rate

Post by Marek Muc »

Which IFRS paragraph are you referring to specifically in the context of this topic?
Leo
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Re: Interest-free loans or loans at below-market interest rate

Post by Leo »

you are right Marek, the wording is shareholder not parent. So I guess any shareholder could be included in this category.

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JRSB
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Re: Interest-free loans or loans at below-market interest rate

Post by JRSB »

Leo wrote: 01 Dec 2022, 16:23 the difference is considered as a capital contribution if it's under common control.
Or could be a deemed distribution if the interest rate was materially above market rate, rather than below?
Leo
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Re: Interest-free loans or loans at below-market interest rate

Post by Leo »

yes, correct
Johare
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Re: Interest-free loans or loans at below-market interest rate

Post by Johare »

What if the loan is interest free and there's no maturity date per the agreement
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