Hey there Monkeys (okay this sounds wrong but I mean this in a good way),
I am busy trying to structure a capital raising financial model for subsidiaries. A tech holding company works on developing IP from R&D and then launches the IP in the market under a subsidiary.
My main question is how do you show the cash used to develop IP (i.e. R&D costs) as equity in the subsidiary. Also, how do I show the equity investment in the holding company of the subsidiary?
Really keen on how to best show this so that we can move to have a funding discussion as opposed to accounting treatment of all these things.
Hey Njabulo Vincent-Hadebe, I'm here to break the silence...any of these links help you?:
You're welcome.
My understanding:
Parents books: CR Cash $x Dr Investment in Sub $x
Sub books: Dr Cash $x Cr Capital/ Equity $x etc.(if wholly owned subsidiary)
Cr Cash $x Dr R&D expenses $x
Thanks Moe Winchester this is really the simplicity i was looking for. As a follow up question, How would I revalue the underlying investment as the subsidiary grows (makes a profit from sales when they start), would it be the accounting treatment as the equity method of revaluing investments?
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