Dear All,
I am stuckup in a situation. Please help me out.
Suppose there are two companies. A Ltd (Holding Company), & B Ltd(100%subsidiary).
A ltd given foreign currency loan to B Ltd. Now B Ltd. has not paid the said loan since 5 to 6 years.
Is there any way out to avoid the booking of foreign currecy losses to hit the P & L.
By converting loan to equity, is it possible avoid the losses to hit P & L.
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Yes loan can be squared off by converting it to equity. Conversion will be recommended only if entity A Ltd knows that repayment from B Ltd is not possible. If A Ltd wants the money to be repaid then conversion is not recommended because on conversion to equity A Ltd will be forgoing the right to repayment.
On converstion to equity it will get eliminated in the consolidated financial statements of A Ltd.
No loss on translation will be carried to P&L account then.
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