Okay, so they want to sell at Market Value to their subsidiary. I can understand that. But it should be done giving the subsidiary the Right of First Refusal. This way a valid market price is established and the subsidiary - apparently who wants it very badly - can decide to exercise its Right of First Refusal or not.

Am missing something here. On a consolidated financial statement it should not matter what you bought or so to a subsidiary. Other than any minority interest component, the rest of the transaction is reversed on consolidation.

Glock, its amazing how sometimes meme's propagate on the internet at what can only be called something similar to a mass sub-consciousness. I don't want to put on my tin foil 3 piece suit with my hat, but your comment resounds of the growing debate surrounding corporate rights.

Tom Mullen wrote..

On this point there were some thoughtful comments attempting to determine whether corporations have rights or whether only people have rights. I would argue that the rights in question when discussing corporations are those of the shareholders, who retain all of the same rights to life, liberty, and property as any other market participant. Some argued further that the shareholders obtain certain privileges granted by government, particularly in limiting liability, that justify taxes or restrictions that would not be justified on individuals.

However, this argument ignores the fact that corporations are required to register and therefore declare to all of society their corporate status. As the decisions to form a corporation, buy its stock, lend it money, or purchase its products are all made voluntarily and with full knowledge of its corporate status, there is no justification for government to impose special restrictions upon a corporation outside of those disclosure requirements necessary to inform the public that it is a corporation.

Re: http://thomasmullen.blogspot.com/2009/08....

Further evidence that the growth of the collectivist mindset favors the head of the beast and not the well being of the body. Upon the onset of sacrificing individual rights in favor of the collective, the logical progression would be to sacrifice component rights within the collective to favor further vertical consolidation.

In sum, we are not entering a brave new world of humanist design but more of a neo-feudalistic structure coalescing into a command and control structure of favored oligarchical entities.

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Am missing something here. On a consolidated financial statement it should not matter what you bought or so to a subsidiary. Other than any minority interest component, the rest of the transaction is reversed on consolidation.

If the sub bids WELL OVER what anyone else will you can claim the "price" is valid.

This is what you call Enron Accounting. We all know how that turned out...

"but its a perfectly-legitimate BARGE transaction!"

Fast forward to 4:25 :)

So where does the subsidiary get the money to "buy" the "asset" ? Some accountant help me out here - what is the subsidiary using to "fund" the purchase ?

Certainly Tesla, they can just hand money back and forth, no? :)

well, as you say there's a small cash flow issue that may arise amongst friends

wow a comedy of frauds.

do anything to delay the inevitable.

Thank you Genesis for educating me in the intricacies of this fraud, chaos, and mayhem ( and those words don't adequately describe what is happening and going to happen).

Just a sad state of affairs

I have to agree with Fortune, selling to a subsidiary is a wash - no matter what the price. There can't be any 'true' assessment of the value of the asset, because it wasn't really sold. But if their accounting rules allow it, I guess the stockholders are screwed.

Hey Gen,

Have you seen this post at Financial Armageddon? Apparently some of our own banks are reconfiguring their crappy CDOs, etc, into NEW and BETTER CDOs and reselling them as a means of unloading their "assets":

http://www.financialarmageddon.com/2009/....

This is something I fear. These criminal bankster frauds rejiggering their garbage and simply passing it along to the same municipalities and pension funds, etc, and in this way getting their own crap off their back so they can go on with business as usual.

**** and pillage away!

Yep. I already wrote on it a while back.

This **** really ****es me off.

Good to hear something about the UK, haven't found anything like the Market Ticker over here.
If I'd found this site 18 months ago, I'd be 400k better off (that's 'sterling' btw). 100k of that went to RBS due to a development loan taken out at precisely the wrong time, so naturally I was cheering on the protestors as they broke the windows of head office a few months back.
What I was wondering was could this be a way of writing off the debt and therefore help the government?

Ah forget it, it's all just smoke and mirrors...

Coming to a U.S. bank near you soon, I'm sure . . .

at least bidding up the price of the repossessed house is good for the debtor (we have recourse loans over here). Doesn't help those priced out of home ownership though.

Gen - Fortune is right. Assuming the subsidiary is part of the consolidated group, it won't make a difference whether or not they pay $1 or $2m dollars for the house, as the transaction would be eliminated and recorded at the original cost (subject to the current method of valuation).

The only way this would work would be if a non-consolidated entity (i.e. an associate or equity investment or unrelated 3rd party) bought this instead. However, by definition, these entities are not controlled by the parent, otherwise they would be subsidiaries. On that basis, i can't see a company with an interest in another company that it doesn't control, being able to make it buy loans/properties at significantly more than market value.

Refer to IASB 3 and IASB 27. www.iasb.org

The real issue is whether or not these assets are being marked to market (and whether or not they should be). I think yes, but that's a whole different discussion.

As for funding, it's probably just an accounting journal in terms of an intercompany loan.

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apparently who wants it very badly

. I don't think that can be claimed. How do you know that?

It's just accounting games where the money comes from the same, sort of, pot.

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at least bidding up the price of the repossessed house is good for the debtor (we have recourse loans over here). Doesn't help those priced out of home ownership though.

Well that's the idea anyway. But you have to believe that there are enough people who aren't priced out of inflated housing prices for you to get out. And then what?

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Coming to a U.S. bank near you soon, I'm sure . . .

Bearing in mind Gordon Brown pre empted Henry Paulson with the TARP

Makes me wonder about Capital Gains Tax implications as well



Could be good for taxpayers

PLS,
That's just it there aren't enough people who can still afford/qualify for the over-priced RE anymore to maintain housing prices at their former levels. ~Half mortgage holders underwater by 2011. Who's going to buy from them? The newly unemployed? The attempt is desperate, misquided and totally futile.