Date: October 9, 2013
Subject: Notes receivable from related parties
While testing accounts receivable, it has come to my attention that there are some issues regarding notes receivable owed by family members of Mr. Sigar. Because these notes were issued to individuals directly related to Mr. Sigar, there are some additional considerations that must be taken into account when recording and classifying these notes.
According to FASB accounting ...view middle of the document...
In addition to this it is important to note that, in accordance with codification 850-10-50-5, the transactions cannot be presumed to be carried out on an arm’s-length basis. Therefore, it is important for us to explicitly state the nature of the notes receivable and not simply imply that they completed on terms equivalent to those in an arm’s-length basis.
It is also important to consider these transactions from an international accounting standpoint as well. According to the International Public Sector Accounting Standard (IPSAS) 20 section 27, the reporting entity must disclose the nature of the related party relationships, the types of transactions occurred and the elements of the transactions necessary to clarify the significance of these transactions to its operations and sufficient to enable the financial statements to provide relevant and reliable information for decision making and accountability purposes.
In conclusion, the auditing department believes that it is important to disclose the transactions with the Sigar family in a separate set of financial statements in accordance with FASB and international guidelines. If the related party transactions were included in the standard financial statements, it would affect