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Who's Balance Sheet does the property sit on?

HELP - accounts due tomorrow (well Friday, but that means tomorrow really)

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Co A purchases a property. It then subsells to related (by common ownership & director) co B '99% of it's equitable interest in the property'.

'The consideration for the sub-sale B agreeing to grant a 0.25 percent RTI Linked unsecured Perpetual Annuity Bond with a nominal value of X'

Final wording on the legal agreement is 'It is hereby agreed that on completionof the purchase of the propert ... the property shall be held by A on trust as to 1% of the beneficial interest in the property for A and the remaining 99% on trust fo B absolutely'.

Mgmt accounts have the property on A's Balance Sheet (undepreciated). Property is used for A's trade, no rent it paid.

Questions:

1. Should the property be wholly on A's Balance Sheet, with no entry in B's accounts?

2. A hasn't actually drawn on B's bond (rather a bank loan was taken out to fund the original purchase), presumably I don't need to reference it in anyone's accounts?

Many thanks

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By johnt27
17th Apr 2019 11:54

Who holds the risks and rewards of ownership? Which company insures, repairs, rebuilds etc?

It sounds similar to a sale and leaseback arrangement, although linked to a bond rather than lease, so in the absence of other info I'd plump for Company A.

As for disclosures usual FRS 102/105 rules apply

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to johnt27
17th Apr 2019 12:46

Thanks

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17th Apr 2019 12:40

I see some bad spelling and grammar here, but the difference between "who's" and "whose" should really be clear to any accountant or grown up person.

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to Justin Bryant
17th Apr 2019 12:46

That post was unlike me in this respect; I appreciate you highlighting my typing errors.

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18th Apr 2019 16:14

Possibly too late, but I'd also want to understand what on earth your client was trying to achieve by such a complex transaction.

It sounds like there was another advisor involved (tax planning?). Maybe they should provide their perspective. If the accounts are prepared on a different basis to those expected, the objectives of the arrangement may fail?

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to paul.benny
18th Apr 2019 18:40

Alas, my client is one of these ones who is his own tax advisor, for all manner of complicated things. Plus his (non-tax, general corporate I think) solicitor likes to put his oar in & once told me why a set of accounts I presented were wrong.

They weren’t.

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