Share this content
6

accounting for liquidation of subsid

practical question

Didn't find your answer?

H has a 100% subsid S, which is soon to be liquidated and phoenixed into B (a sister compnay of H).

It's all arranged with the finance companies & to-be liquidators. I'm preparing the FRS102s1A accounts for H but presumably I can't impair S or have a PBSE note as S hasn't formally entered liquidation and won't have done prior to the filing deadline of H (which can't be extended any further)?

I want to impair S, but don't think I can ... unless someone can correct me?

Thanks

(and yes, it is the same companies as in my previous question)

Replies (6)

Please login or register to join the discussion.

avatar
By frankfx
21st Sep 2020 22:24

Shorten ARD?
Gives more time for the impending PBSE to materialise.

Thanks (1)
Replying to frankfx:
ALISK
By atleastisoundknowledgable...
22nd Sep 2020 07:29

Normally I’d say “good idea”, unfortunately the finance companies want H accounts filed pre restructure.

Thanks (0)
avatar
By paul.benny
22nd Sep 2020 07:15

There are two aspects - the consolidated accounts and the parent company accounts

It's clear that the decision to liquidate has been made. If there was a material third party debtor who became insolvent after year end, you'd provide for a bad debt. So why would you not impair the investment in ParentCo accounts?

As regards the consolidated accounts, again, the decision to liquidate has been made. Subsid accounts can no longer be prepared on a going concern basis but must be prepared on a liquidation basis - ie based on expected realisations. These are the accounts you should consolidate.

Any goodwill on consolidation should be impaired - and then written out in the following year once Subsid is gone.

Thanks (1)
Replying to paul.benny:
ALISK
By atleastisoundknowledgable...
22nd Sep 2020 07:27

But if S is still currently trading, can H provide for it being liquidated?

I might be getting confused with something else, but it’s not allowed to trade insolvently in the knowledge of a planned liquidation, is it? (Appreciate I didn’t say it was insolvent previously)

Both are small so no consolidation.

Thanks

Thanks (0)
Replying to atleastisoundknowledgable...:
avatar
By paul.benny
22nd Sep 2020 07:42

If S is known to be insolvent, all the more reason to impair the investment.

I've limited knowledge of insolvency law but I don't see a fundamental issue with trading while the decision to liquidate is implemented. After all, sale of a going concern is likely to generate more funds for creditors than sale of a business that closed a few weeks ago.

Incurring new liabilities (eg buying stock) and paying monies to connected parties would seem to be a no-no. That said, I would consult your insolvency practitioner for guidance.

Thanks (1)
Replying to paul.benny:
ALISK
By atleastisoundknowledgable...
22nd Sep 2020 09:14

Thanks Paul - that makes perfect sense. Liquidator is on board, so I assume ok.

Thanks (0)
Share this content

Related posts