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IFRS 10 - Intercompany transactions

Posted: 14 Jan 2022, 11:22
by LindsayM
H All
Consider the Company structure below:

Company A (Parent & investment entity) holds 100% in Company B (considered as a company servicing the group with investment related services) and 100% in Company C.
During the year, Company B has given a loan of $100,000 to Company C which is still outstanding at year end.
As per IFRS 10, given that the parent (Company A) is an an investment entity, it is exempt from consolidating Company C and show only "Inv in sub at FV" in its balance sheet.
And given that Company B is a service company, it should be consolidated in Company A.
My question is how do we treat the loan receivable and loan payable of $100,000 which is an intercompany loan between related companies. Is it eliminated and how?

Thanks
Lindsay

Re: IFRS 10 - Intercompany transactions

Posted: 14 Jan 2022, 12:12
by JRSB
Great question.

My question would be - when you determine FV of B, do you include the fact that it has a 100k receivable on its' balance sheet?

Re: IFRS 10 - Intercompany transactions

Posted: 14 Jan 2022, 12:25
by LindsayM
Yes, on the balance sheet of B, there is the loan receivable.

Re: IFRS 10 - Intercompany transactions

Posted: 14 Jan 2022, 13:17
by Marek Muc
elimination of intercompany balances is a consolidation procedure so I would not eliminate it at all in this case

Re: IFRS 10 - Intercompany transactions

Posted: 14 Jan 2022, 13:28
by LindsayM
This is what I was thinking too. Unless JRSB has a different view.
Thank you.

Re: IFRS 10 - Intercompany transactions

Posted: 14 Jan 2022, 16:06
by JRSB
No I don't - I was just interested as I haven't seen the case. So Marek the liability to B would feature in consol balance sheet?

Re: IFRS 10 - Intercompany transactions

Posted: 14 Jan 2022, 17:22
by Marek Muc
yes, except that it's B's receivable from C if I got it right

Re: IFRS 10 - Intercompany transactions

Posted: 17 Jan 2022, 11:10
by LindsayM
Thank you guys for your inputs.