It is possible for a subsidiary company to benefit from Enterprise Development contributions that were made by its holding company. The allocation of this spend will be made (in most cases) according to the proportional Net Profit after Tax that the subsidiary contributes to the holding company.
In order for this to be allowed, the following needs to be in place:
- The measured entity must qualify as subsidiary – ie. it must be controlled by the holding company contributor.
- There must be a mandate in place whereby both the subsidiary and the holding company agrees that these contributions will be made at Group level on behalf of the subsidiary. This should be in writing and decided at Board level for both companies.
- If the allocation of contributions to subsidiaries are made in line with the NPAT contributions of each subsidiary toward the Group (which is usually the method of allocation), then this should also be stated in the written mandate.
- Contributions at group level must be made within the financial period applicable.
This allocation of group-level contributions could also be applied in the same manner for Socio-economic Development spend.
