Waiver of loan to subsidiary
Waiver of loan to subsidiary
Hi All,
Need your views on the below query
Company A (Holdco) granted an interest-bearing loan to its subsidiary Company S for 5 years.
At the end of 5 year A has waived the loan amount along with interest outstanding.
I would like to know how this transaction needs to be accounted for in the books of A and S
I believe S will pass the below accounting entry:
Intercompany loan............................Dr
Interest accrued...............................Dr
Other equity....................................Cr
Accounting by A:
Loan to subsidiary written off (P&L)..............Dr
Loan....................................................Cr
Please let me know your views and any guidance to refer if specifically address this.
Thanks
Need your views on the below query
Company A (Holdco) granted an interest-bearing loan to its subsidiary Company S for 5 years.
At the end of 5 year A has waived the loan amount along with interest outstanding.
I would like to know how this transaction needs to be accounted for in the books of A and S
I believe S will pass the below accounting entry:
Intercompany loan............................Dr
Interest accrued...............................Dr
Other equity....................................Cr
Accounting by A:
Loan to subsidiary written off (P&L)..............Dr
Loan....................................................Cr
Please let me know your views and any guidance to refer if specifically address this.
Thanks
Re: Waiver of loan to subsidiary
this is a common control transaction and it is generally accepted to debit investment in subsidiary by parent when it gives something 'for free'
what is the reason of this waiver? i.e. whether the subsidiary cannot repay it due to liquidity issues or other reason?
what is the reason of this waiver? i.e. whether the subsidiary cannot repay it due to liquidity issues or other reason?
Re: Waiver of loan to subsidiary
Ya, the primary reason is liquidity only.
Re: Waiver of loan to subsidiary
ok so your suggested entries make sense
Re: Waiver of loan to subsidiary
Also just to reconfirm that both principle and interest will be accounted under equity on write back by S
Re: Waiver of loan to subsidiary
yep, the whole carrying amount of the liability
Re: Waiver of loan to subsidiary
Regarding the posting of A I would post the amount waived on investment of S and then do a impairment test.
What are your thoughts?
Thanks
What are your thoughts?
Thanks
Re: Waiver of loan to subsidiary
This is also acceptable in my opinion
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Re: Waiver of loan to subsidiary
Hi Marek & members,
Sorry to bring this old thread to life again but we face a similar scenario in our company hence arrived at this thread. I am struggling to follow the logic behind direct transfer of subsidiaries loan into other equity upon write back? Your help will be greatly appreciated.
Sorry to bring this old thread to life again but we face a similar scenario in our company hence arrived at this thread. I am struggling to follow the logic behind direct transfer of subsidiaries loan into other equity upon write back? Your help will be greatly appreciated.
Senior Compliance & Reporting Manager
Ocean & Logistics Reporting & Accounting
Maersk Group
Ocean & Logistics Reporting & Accounting
Maersk Group
- JakobLavrod
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Re: Waiver of loan to subsidiary
Hi!
Is not the point that since repayment is waved, one could see the transaction as if the subsidiary paid back the loan and then Company A invested this amount into Company S?
Is not the point that since repayment is waved, one could see the transaction as if the subsidiary paid back the loan and then Company A invested this amount into Company S?
IFRS 9 Impairment Specialist
Risk Control at Svenska Handelsbanken
Risk Control at Svenska Handelsbanken
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Re: Waiver of loan to subsidiary
Hi Jakob,
Thanks and interesting. Are the investments not missing then in A’s books? Following the analogy you described, I would then make a reclass between Investment account and loan receivable from B. Do you agree?
Thanks and interesting. Are the investments not missing then in A’s books? Following the analogy you described, I would then make a reclass between Investment account and loan receivable from B. Do you agree?
Senior Compliance & Reporting Manager
Ocean & Logistics Reporting & Accounting
Maersk Group
Ocean & Logistics Reporting & Accounting
Maersk Group
- JakobLavrod
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Re: Waiver of loan to subsidiary
Hi!
You are moving from a loan receivable that A has on S to an investment A has in S yes. I do not work with equity positions, so a little bit unsure about the appropriate accounting treatment there in detail.
You are moving from a loan receivable that A has on S to an investment A has in S yes. I do not work with equity positions, so a little bit unsure about the appropriate accounting treatment there in detail.
IFRS 9 Impairment Specialist
Risk Control at Svenska Handelsbanken
Risk Control at Svenska Handelsbanken
Re: Waiver of loan to subsidiary
Hi Ketan Marwah, please start a new topic and describe the scenario you're dealing with.