FRS 102 Intercompany loans

How should large intercompany loans be treated under FRS102 when there are no terms attached

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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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By johngroganjga
11th Dec 2017 08:49

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.

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RLI
By lionofludesch
11th Dec 2017 09:54

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.

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Replying to lionofludesch:
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By paulwakefield1
11th Dec 2017 11:51

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.

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By Slomanse
12th Dec 2017 07:48

Many thanks

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