Page 8 - Finac2 Test 1 Slides - 3. Intra-Group Transactions

CONSOLIDATIONS AFTER THE DATE OF ACQUISITION

Bank overdrafts and guarantees

• On consolidation, the bank overdraft of one entity in the

group should only be set off against the favourable bank

balance of another entity in the group, if both entities have

their accounts at the same bank and when all of the

following three conditions have been met:

• both entities have bank accounts at the same financial institution;

• the bank itself would set off the two accounts against each other in

terms of an agreement between the two entities concerned and
the bank; and

• the group has the intention to settle the amounts on a net basis.

• It is clear that the set off of bank accounts within a group

does not constitute intragroup transactions and requires

special treatment.

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