Borrowing costs capitalization and consolidation?!
Could you please help with the following situation.
Mother company (company A) has given loan to its 100% subsidiary (company B), which on the other hand capitalizes the borrowing costs since the loan is used to build a qualifying asset. In order to be able to provide loan to its 100% subsidiary, the mother company has obtained loan from the ultimate parent (company C) in the same amount but with different interest rate. Now, for the purpose of the the consolidated financial statements of company A (which includes company B as well) what intercompany eliminations should be made?!?!
The interest income in company A should be eliminated against what? Because company B does not have interest expense in its income statement since it is fully capitalized?? Should the elimination be against the qualifying asset? And in what amount should it be? Should it be in the amount of the interest between company A and B or between company C and A since this is actually the expense to the group (Companies A+B). Could you please advise how to proceed with this?!?