Blogger
Share this content
0
2
1461

Capital reserve

Our group parent company wishes to strengthen our balance sheet by introducing cash into my company. They want to show the cash as a 'Capital Reserve' alongside Share Capital on our balance sheet. Our auditors, however, say that the capital reserve must be shown as a long term liability. This would not increase our net worth. Which is right?

Replies

Please login or register to join the discussion.

avatar
30th Mar 2012 14:25

What do you think?

http://www.legislation.gov.uk/uksi/2008/409/contents/made

http://www.legislation.gov.uk/uksi/2008/410/part/2/made

 

Is this a gift (Income) or a loan (hint:loan) from Group.

Why do Group think it is a reserve? Are they foreign?

Do you think auditors just make things up to be annoying?

Thanks (0)
avatar
30th Mar 2012 17:06

To show it as something akin to a capital reserve, one solution would be to issue additional shares at above par, thus creating a share premium account..........but of course once you've done that you can't get your money back unless you sell the shares!

 

 

 

Thanks (0)