- Original Poster
- #1
I read a news item on BBC News earlier this week about an Accounting 'Trick' used in the Accounts of a UK PLC whereby an 'Asset' was created when a newly formed subsidiary issued shares which were 'sold' to another newly formed subsidiary of the same Group PLC in return for an IOU for £1.47B.
Then the value of the Asset increased to £1.68B as interest was added.
The IOU effectively created a balancing Liability which rested with the other subsidiary meaning that the net effect was an equal increase in Asset and Liability values on the Group Consolidated Balance Sheet.
Meanwhile, the subsidiary with the 'Asset' has benefitted because the increase in value has reassured the Regulators that they are financially strong.
The shares have no value the BBCs source said, but the Group PLC spokesman said the Asset did have value and was backed up by other Group Assets.
Has anyone here successfully done anything like this?
Then the value of the Asset increased to £1.68B as interest was added.
The IOU effectively created a balancing Liability which rested with the other subsidiary meaning that the net effect was an equal increase in Asset and Liability values on the Group Consolidated Balance Sheet.
Meanwhile, the subsidiary with the 'Asset' has benefitted because the increase in value has reassured the Regulators that they are financially strong.
The shares have no value the BBCs source said, but the Group PLC spokesman said the Asset did have value and was backed up by other Group Assets.
Has anyone here successfully done anything like this?
