Financial contribution to subsidiary

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Adrian B.
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Joined: 31 Aug 2022, 22:12

Financial contribution to subsidiary

Post by Adrian B. »

Hello Everybody!
It is my first topic, so firstly i would like once again send warm greetings ;)

I`m trying to find in IFRS hints how to treat financial contribution (or non-financial, doesnt really matter) to subsidiary in separate FS?
I would definitely go with increasing of value of investment instead of P&L, because i understand in such way economic substance and going forward it also have sense in further consolidation.

But.. i can not find any paragraph which will lead me to that conclussion.
Anyone can help please?

I will be obliged.
Thanks in advance
Adrian
pub_acco
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Re: Financial contribution to subsidiary

Post by pub_acco »

You can account for investments in subsidiaries either at cost, in accordance with IFRS 9 or using the equity method.

https://ifrscommunity.com/knowledge-bas ... tatements/
Adrian B.
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Joined: 31 Aug 2022, 22:12

Re: Financial contribution to subsidiary

Post by Adrian B. »

Thank you.
So i understand, that such contribution is investment in subsidiary, in meaning of IAS 27.10.
At cost = will be amount of money contributed, which will increase my investment value in BS.
Am i right?
Bests
adrian
JRSB
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Re: Financial contribution to subsidiary

Post by JRSB »

yes that's the normal way. depending on local law you might contribute in exchange for new shares, or just contribute in which case the sub will have a capital contribution in equity. yes, increase cost of investment in sub, presuming you use the most common option of 'cost'.
Adrian B.
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Re: Financial contribution to subsidiary

Post by Adrian B. »

Thank you very much!
Leo
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Re: Financial contribution to subsidiary

Post by Leo »

@ JRSB, how would you consider the capital contribution in Equity, is that distributable reserves or not ?
JRSB
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Re: Financial contribution to subsidiary

Post by JRSB »

that's a local law question. could depend on what was contributed, eg cash or a long term asset etc
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Marek Muc
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Re: Financial contribution to subsidiary

Post by Marek Muc »

By distributable you mean available for dividend payments? If so, capital contributions do not count towards that amount as they are not profits
Leo
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Re: Financial contribution to subsidiary

Post by Leo »

@JRSB, what about in this particular case ?
JRSB
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Re: Financial contribution to subsidiary

Post by JRSB »

yes agree, though that's not to say it can't be made distributable (again local law)
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