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Capital Contribution Accounting

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Suraj Suresh Utekar

Accoutant

34 Points Posted on 21 January 2024

Hello team,

Can you please share me the Accounting of Capital Contribution for below mentioned scenario.

If my Netherlands Entity took a loan from various subsidiaries and invest the same amount i.e. 67.8 mn to contribute a capital in GFK company. How can I record an accounting entries in the books of Netherlands and GFK entities?

Replies (5)

Quick Summary

This discussion focuses on the accounting treatment for capital contributions made by a Netherlands entity to a GFK company. The Netherlands entity financed this contribution by taking a loan from various subsidiaries. The thread outlines the proposed journal entries for both the Netherlands and GFK entities, considering scenarios with and without translation risk.

Yasaswi Gomes new

Finance

3326 Points Posted on 21 January 2024

Since consolidation is not there just do it the normal way like

Netherland books

Dr. Bank

Cr. Loan from subsidiary

And for cash investment

Dr. Investment at cost

Cr. Bank

Gfk books

Dr. Bank

Cr. Equity netherland

Yasaswi Gomes new

Finance

3326 Points Posted on 21 January 2024

Forgot to mention, translation risk is not there if presentation=functional currency. If it is India, then no risk as well if amount paid in one shot. If it is in installments, I think you have to discount cash outflows in arrears with wacc I think or maybe for equity exchange. Pls check that out cause I don't have resources available right now and not at my office