How to account for a reduction in value of an investment in a company
Can anyone advise on the following please?
This question relates to small companies for accounts purposes.
A holding company and 100% subsidiary was subject to a management buyout quite a few years ago. The holding company has the cost of shares at £xxx amount in it's Balance Sheet, and this was partly financed by a loan from the subsidiary, so the subsidiary has a loan owed to it by the holding company of £yyy.
The only asset of the holding company is the shares in the subsidiary.
Since the buyout the industry has sufferered economically, so that the value of the subsidiary's shares in the holding company is significantly overstated, and likewise the subsidiary balance sheet shows a debtor for money owed by the holiding company, that the holding company will not be able to repay.
What is the procedure for writing down the value of the investment in the holding company and the loan debtor in the subsidiary please?
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