Intercompany Interest Free Loan Agreement

Intercompany loans within the group are very common these days. Management should first consider whether the loan could be repaid on request. Assuming that the parent company has granted its subsidiary an interest-free loan of 100,000 CU, the loan is repayable in three years and the market interest rate is 5%. So I asked – but what`s in this request? What is the refund date and schedule? Is it interesting? Excellent article. I have a question about the accounting treatment of the resolution of interest charges in the books of the subsidiary, when the parent company granted loans to the subsidiary for the purpose of establishing assets fixed at the level of its subsidiaries. Can commissioning fees be activated during the construction period, as there is no real interest in this transaction? Hello Manoj, yes, you should also capitalize the cost of interest on intragroup loans, but then be careful and eliminate them when consolidating. P. If we look at the loan in the example above, you will then have to reassess the loan at its ongoing cost by calculating an interest rate (provided there is no repayment in the first year). Hello both, thanks to this is very helpful. Can I ask why, if payment is required in the future, it is a liability and not a loan? Where would the responsibility be? With other creditors? Not on credit? What part of IFRS deals with this issue? Thank you. I am confused because I thought that all loans should be paid in the future, so how do you tell the difference between a loan and another liability, such as a creditor, when the money is transferred between parents and subsidiaries? Thank you very much.

I asked for the documents on the loan that was made available to the parent. This means that you would consider the loan as a current liability. The fair value of this loan is CU 86,384 (it is CU 100,000 in 3 years discounted to current value with a market rate of 5%). Suppose you solved problem number one and said, no, it`s not equity, it`s a loan. Under the latest IFRS 9 requirements, we must apply the general three-step model to all credits (without exception). Thank you for your reply!!! I think I am confused because you said that responsibility is not credit, and a liability can also be a creditor. I wondered how the classification would apply to cash transferred from a parent company to a subsidiary if there was no loan contract and there were no defined repayment terms. What makes the balance a loan? Why can`t it be a creditor? Thank you. The loan may not be granted on normal terms. Dear Silvia, in the article, you stated that “if the loan is made available in the opposite direction (from subsidiary to parent company), then the component “under the market” is recognized as a distribution of the subsidiary” In this case, should we account for the difference of CU 13.616 to a profit or loss as interest charges in the books of the subsidiary? Believe me, it is a very likely scenario, and I have seen it a lot in practice — if the parent is not explicitly talking about repayment and it is not a capital injection, then you have no choice but to treat the loan as repayable on demand. My question is about the impact of IFRS 9 on the financial statements of subsidiaries.