On4 Communications Inc (ONCI)

[QTRADERQ]

Mary, here's how ONCI should have accounted for Cogosense.

Prior to 9/8 closing
ONCI had a 49% minority interest in Cogosense and would record their pro-rata portion of Cogosense net income or loss. That number could have been lumped into sales, or shown as a separate line item under 'Other income and losses'. I've seen it reported both ways.

Subsequent to 9/8
ONCI parent owned 100% and would be required to report on a consolidated basis Cogosense subs books. Inter-co loans would be eliminated. Yet, Steve still shows $2MM debt to Cogosense as of 10/31. Why? That makes no 'accounting' sense. If ONCI truly owns Cogosense, he's accounting for it wrong. In consolidated reporting all inter-co debt is eliminated (offsetted against each other when the parent & subs books are combined)

Elimination of intercompany debt
This type of elimination entry is performed when the parent company makes a loan to the subsidiary and the parent company and the subsidiary possess a note receivable and a note payable respectively. In the event of consolidation or amalgamation of two companies, the loan is merely a transfer of cash, and thus the note receivable as well as the note payable is eliminated.
https://www.readyratios.com/reference/accounting/intercompany_eliminations.html