Brief Notes on Intercompany Bond Transactions Summer I 2009

Brief Notes on Intercompany Bond Transactions Summer I 2009...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Accounting 401 Brief Notes on Intercompany Bond Transactions Summer I 2009 A. From a consolidated point of view, the purchase of an affiliate’s bonds by another affiliate is the same as a partial or complete retirement or early extinguishment of the debt. B. When this type of transaction occurs, the consolidated entity realizes gain or loss as the difference between the cost of the bonds to the purchasing affiliate and the carrying amount of the bonds on the selling affiliate’s books. C. Gain or loss is reported in the consolidated income statement as part of income from continuing operations. If the carrying amount on the selling affiliate’s books is greater than the cost of the investment in bonds, a consolidated gain is realized. D. If a subsidiary purchases some or all of parent’s bonds on the open market, the gain or loss may be attributable to the parent. If so, the intercompany transaction would be downstream. Under this assumption, it is assumed that the subsidiary acquired the bonds acting as an agent for the parent. If the
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/08/2012 for the course ACCT 401 taught by Professor Staff during the Summer '08 term at Texas A&M.

Ask a homework question - tutors are online