Discussion:Related Party Payable - ST vs. LT
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| Revision as of 20:43, 12 March 2007 Natalie (Talk | contribs) (Again, the conse) ← Previous diff |
Current revision JCCPA (Talk | contribs) (Natalie - THANKS) |
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| If there are indeed no terms, what's to stop the lender from calling the loan tomorrow. The issue is not whether it will be paid within a year, the issue is whether the lender expects it to be paid within a year. Actually, I think there is a pronoucement that addresses this issue -- that it is required to be reported as current if there are no terms stating it is long term.}} | If there are indeed no terms, what's to stop the lender from calling the loan tomorrow. The issue is not whether it will be paid within a year, the issue is whether the lender expects it to be paid within a year. Actually, I think there is a pronoucement that addresses this issue -- that it is required to be reported as current if there are no terms stating it is long term.}} | ||
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| + | {{ForumReplyPost|UserID=JCCPA|Date=12 March 2007|Text=Natalie - THANKS. | ||
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| + | It's a related party "note" that certainly will not be paid within the next year. Basically they will pay it whenever they "feel" like it....it was money to seed the new company. | ||
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| + | Jeff}} | ||
Current revision
Discussion Forum Index --> Accounting Questions --> Related Party Payable - ST vs. LT
| 9 March 2007 | |
| Hi All:
I have a new audit client with a related party payable of approx. $46k. There are no stated repayment terms on the note - the only evidence is a note payable. I cannot find anywhere the proper balance sheet classification - whether this should be disclosed as Short Term vs. Long Term. Any pointers would be helpful. Thanks in advance!!! | |
| March 10, 2007 | |
| You have a note payable but no terms? What type of entity? If no terms are noted, do you have an imputed interest issue with respect to the tax return? How did client have it classified? The conservative treatment would be to put it in short-term liabilities. | |
| 12 March 2007 | |
| I discussed this item with another CPA colleague of mine - we could not find anything that discusses this - his conclusion on another client that he worked on was to treat it as long-term since there is no guarantee that it would be paid within twelve months of the year end... | |
| March 12, 2007 | |
| Again, the conservative treatment is to report it as current. If the entity has other debt, the lendor(s) will be interested in things like current ratio and working capital. If you put the debt in as long-term, then those ratios are different.
If there are indeed no terms, what's to stop the lender from calling the loan tomorrow. The issue is not whether it will be paid within a year, the issue is whether the lender expects it to be paid within a year. Actually, I think there is a pronoucement that addresses this issue -- that it is required to be reported as current if there are no terms stating it is long term. | |
| 12 March 2007 | |
| Natalie - THANKS.
It's a related party "note" that certainly will not be paid within the next year. Basically they will pay it whenever they "feel" like it....it was money to seed the new company. Jeff | |
