Final answer:
The acquisition of a subsidiary's bonds by a parent company leads mainly to consolidation issues in financial statements, including the need to eliminate intercompany balances and to potentially address impairment of bond values.
Step-by-step explanation:
When a parent company acquires bonds issued by its own subsidiary, several accounting issues arise. The key problem is related to consolidation of financial statements. Consolidated financial statements are supposed to present the financial position and results of operations for a parent and its subsidiaries as if they are a single economic entity. When the parent company holds its subsidiary's bonds, it means part of the subsidiary's debt is owed to the parent, leading to intercompany balances. These balances must be eliminated in the consolidation process because they are not relevant to external users of the financial statements. The bond purchase could also potentially distort the recognition of interest income and expense on those bonds.
Moreover, if the acquisition of the bonds affects their market value, the parent company might need to assess for any impairment of bond values. This can be a complex process, requiring judgement and estimation. Lastly, although the acquisition of the bonds doesn't directly involve assessment of subsidiary's creditworthiness, the transaction could imply that the parent company needs to reassess the economic health of the subsidiary for internal management purposes.
However, the assessment of creditworthiness itself is not an accounting problem created by this purchase.