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Hi there, maybe you can help:

I’m about to write off a company but am unsure what the accounting entries will be in consolidated accounts.

The compant being written off is dormant, it has:

  • Inter-co Dr of £1.0m
  • Share capital of £0.3m
  • Retained earnings of £1.0m with £0.4m being pre-acquistion

The parent company has:

  • Inter-co Cr of £1.0m
  • Investment of £0.7m

On writing off the company I will write-off the interco balances through the P&L generating a Cr in the parent and a Dr in the sub. In the consol nil impact.

I also need to write off the investment in the parent, this generates a Dr in the P&L.

1) In the parent I end up with a Dr of £0.7m from writing off the investment and a Cr of £1.0m from the inter-co, a net Cr of £0.3m to the P&L. Is this correct?

2) What happens in the consolidation? Do I simply leave the £0.3m Cr in the parent’s P&L? Usually the consolidation journal is:

  • Dr share capital £0.3m
  • Dr retained earnings £0.4m
  • Cr investment £0.7m

Presumably I don’t need to make this entry now as the investment is written-off. However it doesn’t seem right that in the consol I’m left with a Dr of £0.7m from writing off the investment.

What am I missing???

Many thanks for any comments