# Intercompany loan

> A loan between two companies in the same group. The interest is eliminated in consolidation, and exchange differences are treated according to whether repayment is planned.

Source: https://finconsol.com/blog/glossary/intercompany-loan/ (updated 28 October 2026)

## Why does it matter in a group?

A loan between group companies disappears from the group balance sheet: the lender's receivable and the borrower's payable are eliminated, and so are the interest income and expense. If the loan is in a foreign currency, an exchange difference arises in one company's books that does not cancel. It stays in group profit or loss, unless repayment is neither planned nor likely in the foreseeable future. The loan is then part of the [net investment in a foreign operation](/blog/glossary/net-investment-in-a-foreign-operation/) and the difference goes to other comprehensive income.[1](#src-1)

## A small example

Zenvara lends Palmridge AED 5,000,000 at 5 percent a year. Annual interest is AED 250,000, which is GBP 50,625 at the average rate of 0.2025. It is income in Zenvara and expense in Palmridge, and the group removes both.

## Sources

## Sources

1. IAS 21 [The Effects of Changes in Foreign Exchange Rates](https://www.ifrs.org/issued-standards/list-of-standards/ias-21-the-effects-of-changes-in-foreign-exchange-rates/), paragraphs 15 and 32.