Share this content

Impairment of investment in subsidiary

What is the accounting treatment if the impairment exceeds the value of investment in subsidiary

Didn't find your answer?

The investment is measured as net assets of subsidiaries. This value impaired and impairment value is higher then investment value due to net liabilities instead of net assets in subsidiaries. Do I bring investment to zero or show a negative investment on the BS? 

Replies (4)

Please login or register to join the discussion.

paddle steamer
By DJKL
10th Aug 2021 11:24

Zero

Thanks (0)
avatar
By paul.benny
10th Aug 2021 13:42

You need to dig a bit deeper. Nil is probably correct, but...

Is this a 100% subsidiary?
Why has the subsid got negative net assets? Is that partly due to liabilities to parent? If not - is going concern basis for preparation of accounts of subsid appropriate?
Does parent have any liabilities in respect of subsid - eg cross-guarantees?

FRS102, para 9.25 requires investments in subsids to be valued at cost or fair value. Fair value of an investment in a subsid is not necessarily the same thing as net assets of the subsid.

Thanks (0)
Melchett
By thestudyman
11th Aug 2021 11:59

It could well be zero, but if the subsidiary does have some value, the correct entry would be to Credit investment in sub, and Debit P&L

How to determine the value depends on the reporting standards.

Thanks (0)
avatar
By paul.benny
12th Aug 2021 12:33

@OP - did the responses help?

Thanks (0)
Share this content