I'm doing some accounts for a client. They have a holding company and invest in two subsidiaries from this holding company. They're all new companies so not making any money yet. Do I put the investment in subsidiary as a non current asset in the holding companies books and as a non current liability in the subsidiaries books?
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When you say "and invest in two subsidiaries" do you mean they invested (past tense) in say shares in the subs but they continually advance monies to the subs, in which case these latter amounts are likely loans not investments?
If loans treat according to the terms, if no agreement to be > one year then they are not and need treated as current.(within one year)
If actual investments, not loan, they will go in fixed assets in the holdco and equity in the sub ,though you will need to consider carrying values.
They have transferred money from their own personal bank accounts to the holding company which I have coded to directors loan. They have then transferred money from the holding company to the subsidiaries to fund the subsidiaries spend. Ie. Purchase of a house for a rental company. They won't be required to prepare consolidated accounts. So I just wanted to check that this will sit in the holding company as a non current asset (they have no intention of the subsidiary having to pay the holding company back) and in the subsidiary as a non current liability
Thanks
So the money from holdco to sub is a loan.
The loan will be in current assets in the holdco and current liabilities in the sub.
If they want it disclosed as a "loan > than one year" they need to document this between the parties, however do be aware that if companies reporting under FRS102 this may have some implications re disclosure/valuation of financial Instruments, and as you mention property acquired by sub there is a distinct possibility FRS102 is to be adopted by sub if holding investment property.
If treatment as a loan is not acceptable they need to consider if the funds might be converted from say loan to share purchase, however such decisions should not be taken rashly.
Have a read at this article re inter co loans, valuation and FRS102
https://www.accountingweb.co.uk/business/financial-reporting/frs-102-int...
It sounds like the holding company is injecting loan capital.
In the holding firms records the subsidiary will be a debtor /asset. The sub co will have a creditor. The holding parent company