AICPA issues accounting, reporting rules for entities that Lend or Finance.

• Author: Garmong, Sydney
• Position: Accounting & auditing news - American Institute of Certified Public Accountants - Brief Article

In Dec. 2001, the AICPA's Accounting Standards Executive Committee issued Statement of Position 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others (No. 014933CPA02). The SOP is effective for financial statements issued for fiscal years beginning after Dec. 15, 2001; earlier application is encouraged.

Trade Receivables. With limited exceptions, this SOP applies to any entity that lends to or finances the activities of others. For example, that arrangement may be a financing arrangement that only involves extending credit to trade customers resulting in trade receivables, a secured mortgage loan, or an unsecured commercial loan. These arrangements were included in the scope of the AICPA Audit and Accounting Guide Audits of Finance Companies (FC Guide) and, accordingly, are also included in the scope of this SOP. The FC Guide covered all financing activities of business enterprises designed to encourage customers to purchase products and services. This included financings of different types and duration, from shorter-term trade financings to extended-term arrangements both for an entity's own products and services as well as for the products and services sold by unaffiliated businesses.

Insurance Companies. Insurance companies were explicitly excluded from the scope of the FC Guide. Consistent with the objective of providing uniform guidance, lending and...