Financial eliminations of intragroup transactions and dividends eliminations (VIII)

Abstract

The new Consolidation regulation in Spain (RD 1159/2010) develops widely the intragroup eliminations. On the other hand, both USGAAP and IFRS/IAS do not show such level of detail. In spite of this difference, the general principle is the same: intragroup balances, transactions, income and expenses and dividends shall be eliminated in full.

Regarding financial eliminations should be highlighted those relating to financial assets that are valued at fair value: an intragroup transaction shall not imply a profit or loss recognition in the Income Statement. The effects on change in fair value should be recorded as fair value adjustments, in the proper equity accounts.

As a general principie, profit or loss will be deferred and recognized in Income Statement when a third party transaction take place outsider the group. Only when a group company acquires financial instruments issued from other group company’s, a result could be recognized. This result will arise from the difference between the acquisition price and the carrying amount of this financial instrument.