Drugking Research Paper

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DrugKing (DK) transfers 2 financial assets DrugKing (DK) transfers 2 financial assets Example 1 Example 1 InsureAll (IA) - a substantive 3rd party InsureAll (IA) - a substantive 3rd party Series B preferred stock of Tip-Top (not traded publicly) DK attaches a call option directly to this stock that will allow it to repurchase the asset from whoever owns the asset up to two years after the transfer date. Series B preferred stock of Tip-Top (not traded publicly) DK attaches a call option directly to this stock that will allow it to repurchase the asset from whoever owns the asset up to two years after the transfer date. Series A preferred stock of Tip-Top (traded publicly) DK holds a call option, written by IA, which will allow it…show more content…
*For all examples above, the presumption exists that the respective call option provides the transferor of the financial assets with a more-than-trivial benefit. *In example 1 & 2, all options have fixed exercise price. March 21, 2013 Research File Memorandum Client:…show more content…
Chicago, IL 76500 Dear Management: Per your request for assistance in accounting for financial assets transfers, I have determined that only the transfer of trade receivables can be accounted as a sale. The transfer of trade receivables meets all the conditions which are required for it to be accounted as a sale: 1) the assets have been put presumptively beyond the reach of DrugKing and its creditors, even in bankruptcy or other receivership. 2) The transferee has rights to pledge or exchange the assets it received. 3) The transferor does not have effective control over the transferred financial assets. Therefore, this transfer can be accounted as a sale. My conclusion results from a search of the authoritative literature that constitutes generally accepted accounting principles. This literature directly addresses the issue and requires that DrugKing account the transfer of trade receivables as a sale. Should you need additional information or clarification, please contact me. I certainly welcome the opportunity to discuss this issue with you. Sincerely, XXX -------------------------------------------- [ 1 ]. ASC 860-10-15-2 Transfers and Servicing - Overall - Scope and Scope

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