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Consolidation

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  • 10-08-2023 9:14pm
    #1
    Bosco26
    Registered Users Posts: 36 ✭


    Hi guys,

    Couple of questions regarding consolidation. 2 companies, UK entity and new Irish entity.

    UK loans £44,000/€50,000 in April. So in Ireland Dr. Bank 50k, Cr. Interco 50k & in the UK CR Bank 44k/Dr Interco 44k. Consolidation works fine the first month.

    Next month Fx changes and I notice €50k = £45k

    My Questions:

    1. Where is the FX journaled to, is it the Parent or the Subsidiary accounts?
    2. If Subsidiary - are the journals the following: Cr. Interco £1,000/€1,250 Dr FX Gains/losses (P&L) - £1,000/€1,250

    Thanks



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    #2
    SureYWouldntYa
    Registered Users Posts: 7,724 ✭✭✭SureYWouldntYa


    1. It depends on the loan agreement and who will get the hit/benefit of the exchange difference. If the agreement is to pay back €50k, this would cost the Irish company £45k and they have the £1k/€1.25k loss so it is reflected in their accounts. The UK company loaned £50k, it got back £50k so no gain no loss for them. However, if the agreement is to pay back €50k then you have the opposite where the UK company gets the hit/benefit
    2. Journal is correct and will be the same no matter which company it is


  • Options
    #3
    Bosco26
    Registered Users Posts: 36 ✭Bosco26


    Thanks @SureYWouldntYa - so basically whoever is taking the hit on the loan, takes the hit on the FX.

    Another question I hope you can help with re consolidation.

    Irish company is subsidiary toparent UK company starts in Jan.

    Month 1 - 10k Euro - FX rate 1:1

    Month 2 - 10k Euro - FX rate 1:0.9

    Month 3 - 10k Euro - FX Rate 1:0.75

    So profits in Sterling and Euro are 10k in M1 in the P&L and BS.

    M2 - Sterling 9k profit but retained earnings will show a profit of 18,000 for 2 months based on the BS date

    M3 - Sterling profit 7.5k but retained earnings will show a profit of 2,250 based on the BS date.

    In the Subsidiary Irish company profits look like 30k euro at the end of 3 months in P&L/BS

    Will in the UK, we had GBP profits of 10k, 9k, 7.5k.


    When I am consolidating how do I make up the anomoly of the BS differences between the parent and Subsidiary in the quarterly accounts?


    Thanks in advance



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