I have recently inherited a client from a retired colleague.
The client is sole director of 2 limited companies with March year ends. One company is involved in investment property (T/O £17,700) & one is a consultancy (T/O £83,800).
There is an intercompany loan totalling £352,448 (2016 - £322,448), the consultancy company being the debtor, the property company being the creditor.
In the past £275,000 of the loan has been put as long term & the remainder, which does have some activity, as current.
The loan is interest free & there are no repayment terms. I have tried to pin him down as to the period of the loan, but it seems to be a case of whenever.
I am completely at a loss as to how to show this under FRS 102 apart from showing it as current & repayable on demand & then try & sort something out with the client in the current year.
Am I missing something? Any ideas?
Replies (4)
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If there are no express terms it is, as you say, repayable on demand. All you need to do then is correct the past error in showing £275,000 of it as long term. FRS102 does no change anything. I am not sure why you are at a loss. You already seem to know the answer to your own question.
Is the client bothered if the loan is shown as a current liability ?
If not, no problem.
If he is, get him to agree some formal repayment terms with himself - bizarre though that may first appear.
But beware of the discounting provisions that will bite if the loan interest is below a commercial rate and the loan is not repayable on demand.