Fortunately, companies with large amounts of receivables
can dramatically improve their balance sheets by partnering with a financial services firm to create a joint venture -- a separate company that oversees and jointly manages the credit and collection processes.
A bank purchased credit card receivables
or accounts from other institutions.
As a result of these inquiries, Weber did not perform additional testing of receivables
but did document in its workpapers both its concerns about the receivables
and its conversations with the company president.
The amount factors are willing to fork over is generally from 75% to 90% of the net face value of the receivables
The portion of receivables
estimated to be uncollectible is generally based on a six-year moving average of the taxpayer's actual bad debts and receivables
Until recently, for example, most private placements were backed by equipment leases, trade receivables
, health care receivables
and subprime auto loans.
The investors receive interest based on multiplying a specified rate of interest by the outstanding participation balance of credit card receivables
As an example of these built-in gain and loss provisions, in the case of a cash basis personal service corporation that converts to S status and that has receivables
at the time of the conversion, the receivables
, when received, are built-in gain items.
But that's not to say the risk you carry on these goods is small -- on the contrary, receivables
are typically the biggest uninsured asset your company has.
1374-1(a), the gain recognized when the cash-basis receivables
are collected (which is usually the first S year) can be reduced by "built-in losses" or "built-in deductions.
Although accounts receivable
are only included in the calculation of net unrealized built-in gain to the extent of their FMV, for purposes of determining the amount of the recognized built-in gain attributable to these receivables
, any amount collected during the recognition period will be considered a recognized built-in gain.