USA Intercompany Loan - Foreign Currency


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We are considering doing an intercompany loan between two of our companies with different currencies. I’ve laid out potential entries for the transaction - have I missed anything?

Initial Loan:

Parent:
Debit IC Rec. $1.3M. (USD)
Credit Cash $1.3M (USD)

Sub:
Debit Cash: $1.5M. (NZD)
Credit IC Pay. $1.5M (NZD)

Translate

Exchange Rate difference posted to CTA on Sub Balance Sheet so USD will match when consolidated and then IC Rec and IC Pay can be eliminated

Monthly Payment:

Parent:
Debit. Cash. $275K (USD)
Credit IC Rec. $275K (USD)

Sub:
Debit IC Pay. $299K (NZD)
Credit Cash. $299K (NZD)

Translate

Exchange Rate difference posted to CTA on Sub Balance Sheet so USD will match when consolidated and then IC Rec and IC Pay can be eliminated


Interest would be posted to PNL (interest exp / interest income)
 
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kirby

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When you do the translation of the sub's NZ books to USD, translate the Interco loan and related payable and related int expense at historical rates and not current rates. That is - always use the rate where, in your example , 1.5NZD = 1 USD.
 
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What if the sub side was entered in USD? Month end revaluation?
 
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kirby

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Well, are the sub's books kept in NZD or USD?
 

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