Question;Case;12-6 Philadelphia CommunicationsYou are;a summer intern working on the audit of the Philadelphia Communications Inc.;(Philly). Philly is a public company that completed an initial public offering;(IPO) a few months ago. Decedents of the founding family headed by John Sigar;the eldest grandchild and current CEO of the company, still own a significant;amount of the company?s stock. Mr. Sigar as CEO and member of the board of;directors is the only family member still involved in the business.You;have been assigned to help test accounts receivable. Specifically, you are;going to test receivables from shareholders. It is your first time doing audit;testing, so you have been reviewing the prior year?s audit working papers to;make sure you understand how things work. There are a number of notes;receivable from several of Mr. Sigar?s cousins. They have taken advances;frequently over the years and have never failed to repay notes when they came;due. These notes are secured by shares of Philly?s convertible preferred stock;purchased by the family members following the IPO. The receivable support;provided by the client does not specify interest or payment terms for these;notes.You;remember from your first semester in intermediate accounting that there are;some special presentation or classification issues regarding these sorts of;receivables. You understand the family members are considered ?related parties?;and there are some extra disclosures required as a result. You are also pretty;sure there is something else that is key here, but you cannot quite put your;finger on it.You;have reviewed your old notes on revenue recognition since that is a big part of;auditing receivables. You have also looked over Chapter 7 of your old ?Kieso?;textbook, but there is nothing included on this sort of situation. There is;nothing in Philly?s audit papers from last year because this is the first year;the family members have borrowed from Philly in the form of secured notes. You;do not think collectibility is an issue primarily because (1) the Sigars are;very wealthy and (2) the preferred stock that secures the notes is worth a good;deal more than the amounts due.Required;1.;Complete;your preparation to test accounts receivable by reviewing theFASB Accounting;Standards Codificationand identify any special presentation or disclosure;issues applicable to the above described situation. Be prepared to discuss the;following: 1.;Applicable;Codification references. 2.;Related;presentation and disclosure issues for the notes. 3.;Any;additional clarifying information needed from companymanagement. 2.;In;anticipation of a follow-up question from the engagement partner (who happens;to be the local office ?expert? on IFRSs), what guidance can you find to;address this situation from an international accounting standpoint?
Paper#39265 | Written in 18-Jul-2015Price : $31