Basaraba Ltd. Owns 80% of the outstanding common shares of Gill Ltd. Gill purchased all of Basaraba's outstanding bond issue on the open market at a discount. The bonds have an unamortized premium attached. This transaction, in effect, retires the bond and results in a gain. Under the agency approach to dealing with a gain on elimination of intercompany bond holdings, which of the following statements is true?

Question

Quizplus · Accepted Answer

Under the agency approach, the gain from the retirement of the bonds is typically assigned to the parent company, which in this case is Basaraba Ltd.