Property

[email protected]

Hi all,

I am completing a set of accounts for a Company that owns 100% of a hotel (hotel is sperate company). I need to show the valuation figure of the hotel but not sure the double entry? I am guessing it would be Debit Assets Credit ???

Thanks!

slackda

Are you prepareing group accounts or single entity accounts for the company?

[email protected]

single entity.

Monsoon

They own 100% of the shares in Hotel Ltd. Therefore its Dr asset investment and Cr however they paid for it. If you are revaluing it then if it's increased in value you Dr asset and Cr Revaluation reserve. I think. Don't rely on this answer - can anyone else confirm if I am right?

slackda

my thoughts exactly monsoon,

different if your doing a group set of accounts though

Monsoon

slackda wrote: »

my thoughts exactly monsoon,

different if your doing a group set of accounts though

If they'd said it was a group I would have declined to comment

Cheers Slackda : )

[email protected]

Thanks guys!

That's where I'm stuck though as the company I'm doing the accounts for didn't pay directly out of their own bank account although they own the hotel.

Basically here is the set up:

Company A Owns 100 % of the hotel-valuation is say £10m

Company B (The Hotel) repays the loan

Loan is in Company B name for £5M

Owners of Company A lent company B £5m to pay rest of balance to purchase

Therefore Company A only owns Company B and isn't liable for the loan

Does this make sense?

slackda

think you have lost me on this.

Loan is in Company B name for £5M:- Where is this loan from?

Owners of Company A lent company B £5m to pay rest of balance to purchase:-why are they lending to company B if company A is purchasing.

when did this happen? during the period your reporting i assume?

Do you have a set of accounts for the Hotel on Date of acquistion?

Rinske

Sounds like a "capital asset buy out" or whatever they are called to me!

I think the best example I know is European and American Capital. EC and AC help current board members buy out the company by providing them with the loans to purchase it, but they then own the company until the loan has been paid off.

Have a look at the AC statements, they publish their statements on the website and they actually give quite a good explanation on how it works. The different types of financing are explained here

slackda

yeah it looked like a "management Buy out" but im not 100% sure who is funding it.

If its the owners of company A then unless they have used company A as security on the loans to fund the buyout i would say that company A has no involvement, and there is no investment to be recorded.....