I have a question/need clarification which has consolidation impact and I would like to discuss what would be the right treatment.
Let’s say we have 2 companies (mother and daughter company) where there has been an inter-company loan granted from the mother to the daughter company and in the consolidated accounts this is correctly eliminated as per the standards.
My question is if lets say the daughter company is not able to repay this loan and there is need to book risk provisions in the mother company accounts, how is this treated in the consolidated accounts. I am not sure against what these risk provisions will be eliminated during the consolidation because accounting entry when originally booking the risk provisions has been made only in mother company books and on the other hand, if this entry is not eliminated, i.e it stays in the consolidated accounts then we will have risk provision but will not have loan linked to these risk provisions since the loan is eliminated through the inter-company eliminations. Can someone please help regarding this issue? Thank you!