Thanks guys, that clears it up for me.
In the event that we merge the companies together (which will probably happen in a year or so), would we book goodwill at this point?
Can anyone help me on this?
Thanks for this. The complication is that the entity in question is a UK based company but owned by a Dutch intermediate holding company. All companies are ultimately owned by the same parent company. I'd imagine the Dutch holding company has distributable reserves but I'd have to check.
The subsidiary we're looking at moving is currently owned by a Dutch parent company (all companies are within the same overall group, but the holding company I refer to is an intermediate holding company for the UK entities). The Dutch parent would sell the company (based in the UK) to the UK holding company at the value held in its books (I don't have the information available yet but I'd imagine it will just be the cost of the share cap). The idea is to boost the UK holding company's balance sheet.
Can anyone help with this query?
Thanks for all your help
Thanks everyone for the helpful answers. The subsidiary was an intermediate holding company, which was a bit pointless, so it was liquidated as part of a corporate simplification.
Thinking it through logically, in terms of what I posted in our books, I've got the right P&L effect, it's just not necessarily in the right places in the P&L, so I need to do a bit of rejigging for stats. I'll move the £2m write-off to offset the write-off of the investment, as it should have been treated as a capital distribution, reducing the investment.
Thanks guys. In terms of presentation in the P&L, can anyone point me in the right direction as to which standard relates to dividend income and what disclosures I will require, and similar for the write-off of investment?
Yes, we have an interco balance, being the share cap, which is also written off. It's actually £2m, so not sure what the tax consequences are of that! Should this just go to a line in the P&L along the lines of "intercompany debt written-off"?
Prior to the above journals, the subsidiary had an intercompany debtor due from the parent, which basically was the result of the parent not paying in cash for the investment initially (i.e. Dr investemnts, Cr interco loan). The dividend cleared this, so in the parent's books, we posted Dr interco, Cr Dividends in the P&L. We were then left with an investment, which we wrote off, so Dr P&L w/o of investments, Cr investments. There investment amount was less than the amount we received in dividends, so we've ended up with a small overall credit to the P&L.
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