Kedar Pande (Self Employed) (896 Points)
06 January 2009Dear 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.
Prakash Popat
(3134 Points)
Replied 14 January 2009
It's Your previledge,You Can COOK like Satyam Raju,You too can COOL it Like Asatyam Raju.
Varun Malhotra
(Chartered Accountant)
(207 Points)
Replied 22 January 2009
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.
CAclubindia
