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Intercompany Notes

Hello, My company (Parent) is giving a loan to a sub (Germany). How should the initial fund transfer be recorded in our parent's and sub's book? Should I create intercompany Note Payable and Intercompany Note Receivable, and I don't think this should be eliminated when we close each period. Please kindly help and advise.


Ted Monohon
Title: VP -Finance / Controller
Company: Fantex
(VP -Finance / Controller, Fantex) |

With what you described, I would record it like you have indicated (Note Rec/Pay). I would make sure you have the loan documented for audit purposes and make sure you are charging an appropriate interest rate (arms-length) for the loan. On consolidation, you would eliminate the Note Receivable and Payable and any accrued interest receivable and payable, since you cannot owe (or be owed) money to (from)yourself.

If the loan isn't repaid on periodic basis or if the subsidiary doesn't have the resources to pay the loan back, the auditors might classify it as an equity contribution regardless of the legal form of the transaction.

Taxation for purposes in Germany and the US might vary from the accounting treatment so check with your tax professional to make sure you have it properly structured so you don't create any unfavorable tax consequences.

Good luck!

(Accountant) |

Thank you. This is what I have thought about.
Have a good day.


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