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Treatment of interest on loan from holding company in consolidated Financial statement

Reshma A (Student CA Final ) (11 Points)

06 February 2023

The interest paid to holding company is capitalised as borrowing cost in the subsidiary company. How to treat this in eliminations in consolidated financial statements?

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4 Replies

Ayush (Executive ) (6232 Points)
Replied 07 February 2023

In consolidated financial statements, the interest paid to a holding company by a subsidiary is treated as an intercompany transaction and is eliminated in the consolidation process. This means that the interest expense recorded in the subsidiary's books is removed from the subsidiary's results and is not included in the consolidated results.

The capitalization of interest as borrowing cost in the subsidiary's books is also eliminated in the consolidation process. This means that the capitalized interest amount is removed from the subsidiary's assets and is not included in the consolidated balance sheet.

Reshma A (Student CA Final ) (11 Points)
Replied 07 February 2023

What will be the impact of depreciation in CFS?

Yasaswi Gomes new (Finance ) (4475 Points)
Replied 14 May 2023

All assets capitalised are consolidated

P+S not unless its an intragroup transaction. Only loans and interest payablra to outsiders must be recognised.

Eg. Youve had a recent self constructing asset and incremental costs capitalised from it. Its consolidated as assets. Anything between groups must be cancelled.

Yasaswi Gomes new (Finance ) (4475 Points)
Replied 20 June 2023

CFS is not mandatory in AS but in Indas.


Parent took loan from subsidiary					-Liabilities & -Assets
Parent loan from subsidiary- Interest & Principle paid					-Finance costs & -Finance income
Subsidiary loan from parent- Interest & Principle paid					-Finance costs & -Finance income
Subsidiary loan from parent outstanding balance					-Liabilities & -Assets