Dear Pat
Well actually, let me put it this way
1) Company A received some stocks from Company B
2) Company A paid some cash for partial amount of the stocks it received
3) Company A plans to pay off the rest by paying operating expenses on behalf of Company B
Anyways, I don't think it plays a big difference, since what you interpreted is similar in context.
So you call this an 'estimated expense funding arrangement'. Is there any literature or evidence regarding that subject?
Thank you
Quote:
Originally Posted by Pat
Strange as described but that is often the case.
If I have this right 1) Co A owns 60% of Co B. 2) Co A is obtaining the other 40% thru this estimated expense funding arrangement.
You ask is this OK? Sure, why not, you have real value transferred in return for stock.
The tricky part, what tricky part? Prepaid or paid in arrears, it doesn't matter. Stock (par value) and paid in capital (contributed capital) can be obtained/recorded either from cash or receivable transactions.
Everything thing gets eliminated in consolidation when statements are prepared for Co A, or not if Co A issues a parent only report that reflects their investment instead.
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