financial support undertaking

Topics related to universal accounting principles and best practices, local GAAP, audit, laws and regulations affecting financial reporting, and other financial reporting topics.
This is also the appropriate forum for beginners to ask any questions, even if they pertain to IFRS.
Post Reply
daljeet
Posts: 22
Joined: 26 Jan 2021, 04:55

financial support undertaking

Post by daljeet »

Can a subsidiary gives undertaking to provide financial support to parent so that the parent can meet its obligation as and when they fall due?
JRSB
Trusted Expert
Posts: 1308
Joined: 01 Mar 2020, 01:10
Location: UK

Re: financial support undertaking

Post by JRSB »

Doesn't really make sense to me... the parent controls the sub anyway so you don't really need any undertakings.
User avatar
Marek Muc
Site Admin
Posts: 3226
Joined: 15 Oct 2018, 17:21
Contact:

Re: financial support undertaking

Post by Marek Muc »

what do you mean by 'giving undertaking'?
JRSB
Trusted Expert
Posts: 1308
Joined: 01 Mar 2020, 01:10
Location: UK

Re: financial support undertaking

Post by JRSB »

Presumably it's about a letter of support in an audit scenario?
daljeet
Posts: 22
Joined: 26 Jan 2021, 04:55

Re: financial support undertaking

Post by daljeet »

Yes letter of financial support. The subsidiary is operating entity and in good financial position.
User avatar
Marek Muc
Site Admin
Posts: 3226
Joined: 15 Oct 2018, 17:21
Contact:

Re: financial support undertaking

Post by Marek Muc »

Then why not. But I agree with JRSB that it makes little sense, unless we're talking about some really exceptional circumstances.
JRSB
Trusted Expert
Posts: 1308
Joined: 01 Mar 2020, 01:10
Location: UK

Re: financial support undertaking

Post by JRSB »

Perhaps there's an extremely influential NCI who has other plans for surplus cash (wants to reinvest rather than dividend or loans to parent) but then there could be a bigger question of control. If it is indeed a subsidiary then it's controlled and probably appoint the people they want to the Board, ie pieces of paper not required
User avatar
Marek Muc
Site Admin
Posts: 3226
Joined: 15 Oct 2018, 17:21
Contact:

Re: financial support undertaking

Post by Marek Muc »

Agreed. But then if the auditors find this paper to be a useful CYA for them, why not give it to them :)
Post Reply