USA Intercompany Loan

[GNB1569]

Hi All,
Could anyone refresh my memory on how do we book an intercompany loan and what the worksheet eliminations would look like?
Greatly appreciated,

 

[bklynboy]

Receivable Side:
Debit Loan receivable from Affiliate
Credit Cash

Payable Side
Debit Cash
Credit Loan Payable from Affiliate

Eliminate Loan receivable against Loan payable against each other and any interest recorded while loan is in effect. Think of it as in consolidation no loan exists so remove any effects associated with the issuance of the loan.

 

[GNB1569]

Greatly appreciated Sir,

 

[AGH the CPA]

So a slight twist on this. What if the loan is to an foreign intercompany like this

US co
DR AR loan $500
CR cash $500

For co
DR cash Euro 475 ($500 USD)
CR AP loan Euro 475 ($500 USD)

Year 1 the consolidation is straight forward

In year 2, the exchange rate makes the balances
AR loan $500
AP loan Euro 475 ($525 USD)

How do you handle the consolidation?

 

[kirby]

Have the foreign entity use the same translation rate method on the loan as they do for their common stock, which also came from the parent. That is, have them translate not at current fx rate but at historical rate so the resulting translated payable will always match the parent receivable.

 

[GNB1569]

So a slight twist on this. What if the loan is to an foreign intercompany like this

US co
DR AR loan $500
CR cash $500

For co
DR cash Euro 475 ($500 USD)
CR AP loan Euro 475 ($500 USD)

Year 1 the consolidation is straight forward

In year 2, the exchange rate makes the balances
AR loan $500
AP loan Euro 475 ($525 USD)

How do you handle the consolidation?

Pretty much the way you have explained. We have not issued any consolidated financials yet. Good news is that there hasn't been much intercompany activity so far.