Who should bear the borrowing cost?

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sheetalkumar kodachawad (Querist)
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21 September 2012 Hi,

A partnership firm acquired assets by buyer’s credit. Generated the revenue for 3 years. The borrowing cost of the buyer’s credit was charged to the respective revenue.

After 3 years of operation the assets were transferred to closely held Pvt. Ltd. Co., where the partners are the only share holders, which is Incorporated for acquisition of the said asset and implementation of new project. However the buyer’s credit was not transferred, as 100 % margin was given by the partnership firm.

The borrowing cost including the loss due to foreign exchange incurred from the date of transfer of assets till the date of repayment of buyer’s credit is substantial amount.

Question:

a) whether the firm can transfer the liability to the Pvt. Ltd. Co. as the benefits of the asset is enjoyed by the company.

b) can this liability be treated as cost of the project under pre-operative expenses.

Amol S Joglekar

Amol S Joglekar (Expert)
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21 September 2012 What is the consideration for partnership firm at the time of transfer of asset?

sheetalkumar kodachawad

sheetalkumar kodachawad (Querist)
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24 September 2012 consideration is at book valuve of the asset

Amol S Joglekar

Amol S Joglekar (Expert)
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24 September 2012 Book value itself is the consideration for the company. Transfer of asset is at book value and not along with its liability, so the liability can not be claimed by the comapny.

sheetalkumar kodachawad

sheetalkumar kodachawad (Querist)
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26 September 2012 If company aquire buyers credit and the assets given as margine for that buyers credit on a later date which are more or less the same, then?

Amol S Joglekar

Amol S Joglekar (Expert)
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26 September 2012 acquiring buyer's credit is very common in asset management companies. The purchase consideration, in such cases is worked out accordingly.

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