Intercompany Loans: How to Classify Them Under IFRS 9 and Mexican NIFs
Intercompany loans are common tools within corporate groups, used for internal financing, capital restructuring, or operational support. However, their proper accounting classification is critical to avoid financial misstatements, tax risks, or audit issues. This article explains how intercompany loans should be accounted for under IFRS 9 and Mexican Financial Reporting Standards (NIFs). We review the most common scenarios and provide guidance on minimizing risk and ensuring compliance.
What are intercompany loans and why do they matter?
Intercompany loans refer to financial agreements between related parties — such as parent companies, subsidiaries, or affiliates. These loans can vary widely in structure: some bear interest, others don’t; some have fixed maturities, while others are repayable on demand.
Before accounting for such a loan, it's crucial to determine whether it falls within the scope of IFRS 9 (Financial Instruments) or should instead be treated as an investment in a subsidiary or associate under IAS 27 or IAS 28.
This article focuses on loans governed by IFRS 9, where the cash flows consist solely of principal and interest payments, and the lender's intent is to hold the loan to collect.
Accounting Treatment: 4 Key Scenarios Under IFRS 9
1. Loan with market terms
Fixed interest rate and maturity.
Initially recognized at fair value, usually equal to the amount lent.
Subsequently measured at amortized cost using the effective interest rate method.
2. Zero-interest or below-market loan
Fair value is lower than the cash disbursed.
The difference is typically recorded as a capital contribution.
Substance-over-form principle applies.
3. On-demand, interest-free loan
Classified as a current liability by the borrower, due to its immediate repayability.
Even if not intended to be repaid soon, it is legally callable at any time.
4. Indefinite-term, interest-free loan
Classified as equity under IAS 32.
No repayment obligation = capital contribution from parent.
Treated as part of the parent’s investment in the subsidiary.
What about Mexican NIFs?
Mexican Financial Reporting Standards (NIF C-2, C-12, C-19, C-20) align closely with IFRS 9. Key principles include:
Classification based on economic substance.
Initial measurement at fair value.
Amortized cost measurement when interest applies.
Recognition of capital contributions when the loan lacks interest or enforceability.
Additionally, Article 28 of Mexico’s Federal Tax Code requires accounting to be maintained in accordance with the NIFs — reinforcing their legal and fiscal relevance.
Common risks of misclassification
The Mexican tax authority (SAT) may assume undeclared income if the loan is not properly documented.
Interest deductions may be denied if there's no evidence of accrual.
Poor classification can distort financial ratios, especially debt-to-equity.
The loan may be deemed a disguised capital contribution, affecting both tax and legal treatment.
Best practices for intercompany loans
To avoid legal and tax risks, we recommend:
Using formal intercompany loan agreements (e.g., mutuo con interés) with market-based terms.
Supporting each loan with:
Bank transfer evidence
Accounting entry
CFDI (in Mexico)
Legal date certainty (via notary or accounting records)
Applying IFRS 9/NIF standards consistently, based on substance.
Maintaining complete documentation for audit and tax purposes.
Do you have intercompany loan operations?
At BCF, we help companies properly structure, document, and classify intercompany loans in compliance with Mexican tax laws and international accounting standards.
Contact us today for a specialized consultation.