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What entries do you book to wind down a Subsidiary

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Say I have a subsidiary company A with only +100 in intercompany receivable, Dividend account is -1000, retained earnings +1000, Fx translation reserve -50, issued and paid up capital for another subsidiary B +50, issued and paid up capital for company A -100. If I were to wind down this entity A (Not dispose of, just want to close it down), what entries do I book? And do I have to record anything in my books as the parent? Any reference to the standard will be greatly appreciated.

my thoughts: Do you as the parent derecognise any goodwill on acquisition to the P&L. Does the subsidiary, A then write-off the $100 intercompany receivable to the P&L? that way equity becomes nil and balance sheet is nil?

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By tom123
23rd May 2021 16:47

Given that you plan to keep this - do you need to do anything right now?

Assuming the monetary values are as small as you say, can you not just leave it as is?

What is the key driver behind this type of transaction?

(Generally the dividend would be offset into the retained earnings figure at the year end)

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Replying to tom123:
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By mikechan
23rd May 2021 21:49

Thanks for your response, mgt wants to close the books. And the values aren't exactly as small, I've just used those amounts.

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By johngroganjga
23rd May 2021 19:00

You just transfer the two remaining assets - the intra group debt and the shares in the sub-subsidiary, to the holding company. If the intra-group debt is with the holding company it will obviously disappear.

Then complete form DS01 and submit it to Companies House.

Job done. You don’t need to make any entries in the books of the subsidiary you are closing because it will never have to produce any more accounts.

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Replying to johngroganjga:
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By mikechan
23rd May 2021 21:47

Thanks for your response, just to clarify, if the intergroup debt is with the holding company, so the holding company will debit intergroup payable and credit other income? Also, so the holding company does not need to make any entries for the dividend and retained earnings of the subsidiary? The subsidiary is also being wound up and has nothing but share capital, fx translation reserves and dividend in it. What entries would the ultimate holding company book relating to the sub-subsidiary equity? Thanks

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By johngroganjga
24th May 2021 10:42

I am not sure what you mean by “if” the intra-group debt is with the holding company. Don’t you know which group company the subsidiary’s debtor is? If not, find out before proceeding any further.

No the holding company won’t credit other income. It will credit the subsidiary’s debt that it will acquire when the subsidiary is wound up - only if the holding company is the debtor of course.

The holding company books the entries relating to the assets it acquires. That is all. The one you have not mentioned is the subsidiary’s shares in the sub-subsidiary, which before the accounting entries can be made will need to be actually transferred of course.

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Replying to johngroganjga:
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By mikechan
24th May 2021 11:23

Sorry I was not clear, the intragroup debt is with the holding company. i.e receivable from holding company of $100. Since the subsidiary will be wound down, that was why I suggested that the holding company will debit its intergroup payable and credit other income as it won't have to pay the subsidiary anymore. As it cannot acquire a debt to itself, right?

The second part of my question, won't the subsidiary need to book entries to nil of its accounting records? i.e credit the intergroup receivable from the holding and debit P&L to write it off, which will then make nil?

Then the final part would be to transfer the sharecapital of $50 in the subsidiary to the holding company? sorry if everything I have said doesn't make sense could you please explain the entries to be booked in the holding company, subsidiary and sub-subsidiary (if any) based on the numbers and information I have provided? Knowing that the plan is is wind up the subsidiary.

Thanks a lot.

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Replying to mikechan:
By johngroganjga
24th May 2021 13:37

In holding company

Dr Investment in former sub-subsidiary 50
Dr Intra group balance 100
Cr Investment in former subsidiary now closed 150

The balance on the investment account to which you have just credited 150 is the profit or loss on the closure of the subsidiary, which obviously goes to P&L.

Those are the only entries. None at all in any other group company.

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By mikechan
24th May 2021 14:09

Thanks a lot!

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Red Leader
By Red Leader
23rd May 2021 19:28

Are you in the USA?

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