Book keeping for investments in subsidiaries | AccountingWEB

Book keeping for investments in subsidiaries

My client formed 'newco' which then purchased the share capital of 2 trading companies. The trading activities of the smaller subsidiary were transferred to the larger subsidiary and this smaller subsidiary is now dormant. The ongoing trading activities have not been 'hived up' to the holding company.

Both trading companies voted dividends to their new parent and in the case of the smaller company, the dividend reduced the reserves to £nil.

I am now preparing the holding company's accounts and would welcome opinions on the correct book keeping.

1. The cost of the acquisitions is shown as investments in the balance sheet.

2. The dividends received are shown as income in the p/l (cash helped to pay for shares)

3. Can the cost of the investments be reduced by the amount of the dividend received and this be disclosed as 'amounts written off investments in the p/l?

I could be over complicating the matter?


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Chris Smail |
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