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FRS102(1a) - interco loans - RP & discounting

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I have a client with a small investment property company.  This company owes another company a large sum (material).  Both companies are owned and controlled by a single director.   We are preparing accounts under FRs102(1a).  Am I correct on that related party disclosure is required?    They are not group companies.   Do I need to make mention of the name of the entity from which the sum is borrowed?  Also, its a typical interest free, repayable on demand job.  Do I need to discount the loan as well?  Any thoughts would be much appreciated. 

 

 

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By paul.benny
22nd Aug 2019 12:40

Related party disclosure - yes
Name of the entity - as minimum, 'another company under common control'. But why not name it.
Discounting - not if repayable on demand.

A large interest-free loan? Does that not breach transfer pricing rules?

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Replying to paul.benny:
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By johnt27
22nd Aug 2019 12:51

Quote:

Related party disclosure - yes
Name of the entity - as minimum, 'another company under common control'. But why not name it.

Incorrect - it's one of the significant disclosure changes that FRS 102 1A brought in when transitioning from FRSSE.

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Replying to johnt27:
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By paul.benny
22nd Aug 2019 13:07

Oops.
It's only the full standard that requires disclosure.

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By johnt27
22nd Aug 2019 12:51

If you are applying FRS 102 1A no related party disclosure is required because 1A restricts related party transaction disclosures to the following:
- owners with a participating interest
- companies with a participating interest
- directors
- intra-group transactions provided that the subsidiary involved in transaction is not wholly-owned

For the loan itself, assuming there is no formal agreement in place and it is repayable on demand, then there's no need to discount as any adjustment would equal £0

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Replying to johnt27:
By jon_griffey
22nd Aug 2019 19:09

If I might expand on that. FRS102S1A says: -

(a) owners holding a participating interest in the small entity; [this does NOT include individuals as A "participating interest" means an interest held by an undertaking in the shares of another undertaking as defined in SI 2008/409. Individuals are not undertakings]
(b) companies in which the small entity itself has a participating interest; [there is no mention of fellow subsidiaries]

And only then where the transaction has not been concluded under normal market conditions - which could be interpreted very loosely.

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By Julie.T
22nd Aug 2019 12:56

Thank you very much all!

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