AICPA's Guide to Reporting and Disclosure Problems for Private Companies

• Chapter 0 - Overview
  • Course Goals
  • Introduction
  • Organization
  • GAAP for Private Companies
    • FASB Codification Project
  • Standards Overload
    • Private Company Financial Reporting Committee
  • Other Comprehensive Basis of Accounting (OCBOA)
  • Financial Statement Disclosure
  • References for Reporting and Disclosure
  • Financial Statement Examples
  • The FASB Accounting Standards Codification™
    • Key Items Regarding the FASB ASC
    • Population of FASB ASC
    • Essential and Nonessential Content
    • Topical Structure
    • Referencing the FASB ASC
    • A Helpful Tool
  • Conclusion
• Chapter 1 - Commitments and Contingencies
  • Learning Objectives
  • Introduction
  • Summary of Principal Provisions of the Key Pronouncements
    • Contingencies
    • Compensated Absences
    • Classification of Short-Term Obligations
    • Disclosure of Operating Leases by Lessees
    • Disclosure of Long-Term Obligations
    • Disclosures of Indebtedness of Others
    • Disclosure of Concentrations of Credit Risk
    • Accounting for Environmental Remediation Liabilities
    • Subsequent Events
    • Disclosure of Certain Significant Risks and Uncertainties
  • Summary
  • Questions and Cases
    • Case 1-1
    • Case 1-2
    • Case 1-3
• Chapter 2 - Related Party Transactions
  • Learning Objectives
  • Introduction
  • Summary of Principal Provisions of FASB ASC 850, Related Party Disclosures (SFAS No. 57)
    • Related Party Transactions
  • Summary
  • Questions and Cases
    • Case 2-1
    • Case 2-2
• Chapter 3 - Going Concern Issues
  • Learning Objective
  • Introduction
  • Summary of Principal Provisions of SAS No. 59, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern
    • Key Requirements
    • Auditing Procedures
    • Indicators of Going Concern
    • Management's Plans
    • Consideration of the Effects on the Auditor's Report
  • SAS No. 64, Omnibus Statement on Auditing Standards . 1990
  • SAS No. 77, Amendments to Auditing Standards No. 22, Planning and Supervision, No. 59, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern, and No. 62, Special Reports
  • Summary
  • Questions
• Chapter 4 - Reporting Cash Flow Information
  • Learning Objectives
  • Introduction
  • Summary of Principal Provisions of FASB ASC 230, Statement of Cash Flows (SFAS No. 95)
    • Scope and Purpose
    • Cash and Cash Equivalents
    • Presentation of Cash Flows
    • Content and Form of the Statement of Cash Flows
  • Summary
  • Questions and Cases
    • Case 4-1
    • Case 4-2
• Chapter 5 - Accounting for Income Taxes
  • Learning Objectives
  • Introduction
  • Summary of Principal Provisions of FASB ASC 740, Income Taxes (SFAS No. 109)
    • Objectives of Accounting for Income Taxes
    • Basic Principles
    • Temporary Differences
    • Recognition and Measurement Principles
    • Financial Statement Presentation
  • FASB ASC 740, Income Taxes (FIN No. 48)
    • Determining Whether a Tax Position is Effectively Settled for Recognizing Previously Unrecognized Tax Benefits
    • FSP FIN No. 48-2, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises
    • FSP FIN No. 48-3, Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises
  • Summary
  • Questions and Case
    • Case 5-1
• Chapter 6 - Presentation of Irregular Income Items
  • Learning Objectives
  • Introduction
  • Major Pronouncements
  • Summary of Principal Provisions of Authoritative Literature
    • Changes in Accounting Principles
    • Changes in Accounting Estimates
    • Corrections of Errors
    • Extraordinary Items
    • Comprehensive Income
    • Income Tax Effects
  • Exhibits
  • Summary
  • Questions and Cases
    • Case 6-1
    • Case 6-2
• Chapter 7 - Other Comprehensive Basis of Accounting (OCBOA)
  • Learning Objectives
  • Introduction
  • Summary of Principal Provisions of SAS No. 62, Special Reports
  • Preparing and Reporting on Cash- and Tax-Basis Financial Statements
  • Summary
  • Questions
• Chapter 8 - Latest Developments
• Value Aid Checklists and Illustrative Financial Statements for Corporations

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Chapter 2 - Related Party Transactions

Learning Objectives

• Identify related parties and common related party transactions.

• Draft the required note disclosure for related party transactions.

Introduction

The assumption that transactions are between unrelated parties, each looking out for his or her own interest, is an important underlying assumption upon which much of accounting is based. Related party transactions are ones in which that assumption does not hold. The disclosure requirements for related party transactions are applicable, even if the transactions were carried out on the basis of terms that would have existed in a similar transaction between unrelated parties.

References to transactions with related parties appear or are implied in several places in the authoritative literature. FASB ASC 850, Related Party Disclosures (SFAS No. 57) adopted in 1982, established requirements in the authoritative accounting pronouncements that are generally consistent with Statements on Auditing Standards.

Summary of Principal Provisions of FASB ASC 850, Related Party Disclosures (SFAS No. 57)

Note. This summary is included with this course to reinforce your understanding of the pronouncement. It is not to be used as a substitute for studying the complete text.

Related Party Transactions

Examples of related party transactions include

• Transactions between a parent company and its subsidiaries;

• Transactions between subsidiaries of a common parent;

• Transactions between an entity and its principal owner, management, or members of their immediate families; and

• Transactions between an entity and trusts for the benefit of employees, such as pension and profit-sharing plans.

Typical related party transactions include,

• Sales, purchases, and transfers of realty and personal property;

• Services received or furnished, such as accounting, management, engineering, and legal services;

• Use of property and equipment by lease;

• Borrowings and lendings;

• Guarantees;

• Maintenance of bank balances as compensating balances for the benefit of another;

• Intercompany billings based on allocations of common costs; and

• Filings of consolidated tax returns.

Required financial statement disclosures of related party transactions include

• The nature of the relationship(s) involved;

• A description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented;

• The dollar amounts of transactions for each period for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period;

• Amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement; and

• Control relationships, even if no transactions occur between and among the commonly controlled entities.

Related party transactions for which disclosure is not required include immaterial transactions. Compensation arrangements, expense allowances, and other similar items in the ordinary course of business are also excluded from related party disclosure requirements.

Exhibits 2-1 and 2-2 include examples of related party disclosures drawn from the AICPA's Accounting Trends & Techniques.

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