Sister companies

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Leo
Posts: 909
Joined: 05 Apr 2020, 22:31

Sister companies

Post by Leo »

Hi everyone,

I've got a quick question that I'd like to ask you.

Company A and B are mainly controlled by a family with some other minor shareholders (e.g., company A owned at 60%, company B owned at 70%). And company A and B have a loan relationship with each other. Company A lent 100 EUROS to Company B.

If Company A forgive this loan in benefit of company B, would it be considered as a distribution, which will be considered as a reduction in company A's retained earnings;
Or
Considered as a loss, recorded in the profit and loss of the company A.

I'm asking this is because, if Company A and B are all controlled by a holding company, I would say the former, however, I'm not so sure if they are controlled by physical persons.

Thanks a lot for your insight.
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Marek Muc
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Re: Sister companies

Post by Marek Muc »

A group on individuals also can be regarded as controlling an entity, it's discussed in IFRS 3.B2-B3
Leo
Posts: 909
Joined: 05 Apr 2020, 22:31

Re: Sister companies

Post by Leo »

Perfect, thanks a lot Marek!

sorry for pushing it a bit further, can this family produce consolidated financial statements including company A and company B or that should be combined financial statements like pro forma FS which doesn't have any legal substance.
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Marek Muc
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Re: Sister companies

Post by Marek Muc »

it depends on the local law but my guess is that individuals aren't required to produce consolidated financial statements so there won't be any of that
Leo
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Joined: 05 Apr 2020, 22:31

Re: Sister companies

Post by Leo »

Brilliant as always!
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