Determining the Accounting for Receivables from Officers and Directors.
Memorandum to file
Date:
From:
Re: Determining the Accounting for Receivables from Officers and Directors.
Facts
Philadelphia Communications Inc. (“Philly”) is a public company that completed an initial public offering (IPO) a few months ago. John Sigar is the current CEO and member of the board of directors. He is the only family member involved in the business and owns significant amount of the company’s stock. While, we were doing audit testing for accounts receivable we came across number of Notes Receivable from several Mr Sigar’s cousins.
They have taken advances frequently but never failed to pay when they came due. The notes are secured by shares of Philly’s convertible preferred stock, which were purchased by the family members following IPO. The receivable support provided by the client doesn’t specify interest payment terms for these notes. During our preparation to test accounts receivable we reviewed the Financial Accounting Standards Board (FASB) Accounting Standards
Codifications (ASC) and identified special presentation and disclosure requirements for these sorts of receivables. We also reviewed above described situation from International Financial
Reporting Standards’ (IFRS) standpoint.
When determining the accounting for receivables from officers and directors, special treatment of these cases must be accorded. The case for Philly refers to related parties transactions, which would require special disclosure in the financial reports. The receivables that is provided by Philadelphia Communications Inc. does not give specification concerning both the terms of payment and the interest payable on these notes.
Testing for Accounts Receivable in Philly Case.
According to Financial Accounting Standards Board (FASB) codifications, there are a number of codification references that are applicable to the Philly case. One applicable reference is FASB ASC 850-10-50-1 on related party transactions. The FASB code 850 discusses the
Date:
From:
Re: Determining the Accounting for Receivables from Officers and Directors.
Facts
Philadelphia Communications Inc. (“Philly”) is a public company that completed an initial public offering (IPO) a few months ago. John Sigar is the current CEO and member of the board of directors. He is the only family member involved in the business and owns significant amount of the company’s stock. While, we were doing audit testing for accounts receivable we came across number of Notes Receivable from several Mr Sigar’s cousins.
They have taken advances frequently but never failed to pay when they came due. The notes are secured by shares of Philly’s convertible preferred stock, which were purchased by the family members following IPO. The receivable support provided by the client doesn’t specify interest payment terms for these notes. During our preparation to test accounts receivable we reviewed the Financial Accounting Standards Board (FASB) Accounting Standards
Codifications (ASC) and identified special presentation and disclosure requirements for these sorts of receivables. We also reviewed above described situation from International Financial
Reporting Standards’ (IFRS) standpoint.
When determining the accounting for receivables from officers and directors, special treatment of these cases must be accorded. The case for Philly refers to related parties transactions, which would require special disclosure in the financial reports. The receivables that is provided by Philadelphia Communications Inc. does not give specification concerning both the terms of payment and the interest payable on these notes.
Testing for Accounts Receivable in Philly Case.
According to Financial Accounting Standards Board (FASB) codifications, there are a number of codification references that are applicable to the Philly case. One applicable reference is FASB ASC 850-10-50-1 on related party transactions. The FASB code 850 discusses the
References: FASB. Related Party Disclosures. Retrieved from Accounting Standards Codification: https://asc.fasb.org IASB. Related party disclosures. Retrieved from IFRS: http://www.ifrs.org