IFRS 10 - Intercompany transactions

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LindsayM
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Joined: 20 Oct 2020, 14:32

IFRS 10 - Intercompany transactions

Post 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
JRSB
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Re: IFRS 10 - Intercompany transactions

Post 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?
LindsayM
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Re: IFRS 10 - Intercompany transactions

Post by LindsayM »

Yes, on the balance sheet of B, there is the loan receivable.
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Marek Muc
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Re: IFRS 10 - Intercompany transactions

Post by Marek Muc »

elimination of intercompany balances is a consolidation procedure so I would not eliminate it at all in this case
LindsayM
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Re: IFRS 10 - Intercompany transactions

Post by LindsayM »

This is what I was thinking too. Unless JRSB has a different view.
Thank you.
JRSB
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Re: IFRS 10 - Intercompany transactions

Post 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?
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Marek Muc
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Re: IFRS 10 - Intercompany transactions

Post by Marek Muc »

yes, except that it's B's receivable from C if I got it right
LindsayM
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Re: IFRS 10 - Intercompany transactions

Post by LindsayM »

Thank you guys for your inputs.
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