Academic journal article Journal of Accountancy

Beware FASB No. 105 "Sleeper" Provision

Academic journal article Journal of Accountancy

Beware FASB No. 105 "Sleeper" Provision

Article excerpt

BEWARE FASB No. 105 "SLEEPER" PROVISION

Practitioners should be aware that FASB Statement no. 105 contains a "sleeper" provision requiring a new disclosure in the financial statements of many small businesses, warns the technical issues committee (TIC) of the private companies practice section of the American Institute of CPAs division for CPA firms.

Paragraph 20 of Statement no. 105 requires generally that "an entity shall disclose all significant concentrations of credit risk arising from all financial instruments . . . ." Practitioners should note that the term "financial instruments" includes, among other things, trade accounts receivable.

According to TIC chairman Edward F. Rockman, the accounts receivable of many private companies have either a regional or industry concentration. "This disclosure requirement applies to the corner drug store and the local retail chain--and everybody up and down the line--not just banks and insurance companies and other financial institutions," said Rockman, a partner at Alpern, Rosenthal & Co. in Pittsburgh. He is concerned that the requirement might not be apparent from a quick reading of the statement summary and text. …

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