We have both a Euro and a USD bank account for the entity A Ltd. which have zero balances and which do not appear to have been used. Whenever an invoice is issued by Entity A Ltd in Euros or USD, the bank account details to be used by the client when settling the invoice are those of Entity B LLP (we settle the invoice via the inter co account in Entity B LLP).
Can you see any issues with this practice from a regulatory point of view?
I assume that the two entities are under common ownership.
The issue here is where is the income recorded.
The transactions are in reality nothing to do with entity B and should not appear on that entities books as such income would be misleading to the readers of the financial statements.
Making it seem as though entity B's turnover is better than it really is would be the only reason that I could see for this sort of arrangement in which case the owners will be disappointed when the transactions need to be changed to reflect the economic reality by removing them from turnover of entity B.
Refer to IAS18 and FRS5 (appendix G) in relation to Revenue recognition,
kind regards,
Shaun.
p.s. I've deleted the duplicate post.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
