how to treat

how to treat

Didn't find your answer?

client is a ltd company

they have bought an new van on HP for a friend.

our client is paying the monthly HP and the friend is paying the same amount to our client each month

they have an agreement in place for this stating that the van has been sold to the friend on day of purchase

not really sure how to treat this as the client has the risk of the HP but no asset

help appreciated!

Replies (114)

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By User deleted
14th May 2015 10:17

Did the company ...

... tell the HP company that the van has been sold? I would say that it is the friend that bears the risk - making payments to the company but having no valid title to any asset.

I assume also that the company is not in the business of buying and selling vehicles - and that it is not claiming a tax deduction for the HP finance charges.

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By johngroganjga
14th May 2015 10:30

I think you are quite safe to treat it by offsetting the payments and receipts against each other.

Strictly however you also have a contingent liability in respect of the future HP payments to disclose.

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By User deleted
14th May 2015 11:21

John has dealt with the accounting - sort of

But what about the legal position?

Assuming that the HP agreement remains with the company, I can't see how there can be a contingent liability. Ask yourself this - if the company were to default on the HP payments, what would happen to the van?

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By User deleted
14th May 2015 11:31

It isn't the company that may default - it's the friend

 

The contingent liability arises from the potential interest expenses that will be incurred if and when the friend no longer reimburses the company.

 

[ie. Contingent upon the friends continuing intention to pay up]

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Replying to kimblemimble:
By johngroganjga
14th May 2015 11:38

Exactly

BananaMan wrote:

It isn't the company that may default - it's the friend

The contingent liability arises from the potential interest expenses that will be incurred if and when the friend no longer reimburses the company.

[ie. Contingent upon the friends continuing intention to pay up]

Exactly what I meant

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By User deleted
14th May 2015 11:41

Under the HP agreement the title remains with the creditor except that under the consumer credit act the creditor cannot take possession of the goods after 1/3rd of the payments have been made. However, that doesn't entitle the debtor (i.e. your client) pass the ownership, which the client doesn't have, to someone else. So ideally the moneys received from the friend could either be in the nature of a loan or hire charges for the use of the vehicle. Once your client has a clean title to the VAN, after the HP is over, they could pass it on to the friend against the moneys received.

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By User deleted
14th May 2015 11:44

Why is everyone missing the obvious?

Unless the HP company has agreed to the sale (and transferred the contract to the friend) the liability rests with the company.

Bananaman - the friend may default on is payments to the company. Equally, the company may default on its payments to the HP company. Either (or both) scenario is possible.

So, assuming that the HP contract remains with the company:

Title does not pass until all payments have been made under the agreement, so the company had no asset to sell to the friend - the sale agreement is worthless.

The company continues to have an actual, not a contingent, liability to meet its obligations under the HP agreement.

EDIT - everyone, that is, except taxguru

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Replying to Tykva:
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By andy.partridge
14th May 2015 11:50

Absolutely

BKD wrote:

Unless the HP company has agreed to the sale (and transferred the contract to the friend) the liability rests with the company.

And what is in it for the HP company to agree? Why did the friend not contract with the HP company in the first place? Dodgy credit history?
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By johngroganjga
14th May 2015 11:48

No-one is missing anything.

Yes of course the HP liability rests with the company - that is why the company is paying it.

Yes of course either of the two parties may default on its obligations. Who said otherwise?

Yes of course the sale of the vehicle is informal and probably does not stand up in law until the HP is paid. Who said otherwise?

So if it is an actual liability where would you put it on the balance sheet BKD?

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By User deleted
14th May 2015 12:07

Not sure what you're driving at, John

Not being an accountant, I would suggest that the liability be shown under creditors, split between amounts due within and more than 1 year.

I fail to see where there is any degree of contingency.

And, before you ask, yes I would continue to show the van as a tangible fixed asset.

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Replying to Mr_awol:
paddle steamer
By DJKL
14th May 2015 12:21

Deferred sale agreement

BKD wrote:

Not being an accountant, I would suggest that the liability be shown under creditors, split between amounts due within and more than 1 year.

I fail to see where there is any degree of contingency.

And, before you ask, yes I would continue to show the van as a tangible fixed asset.

Whilst I agree with you re the creditor being reflected in the Company's balance sheet I am not convinced re the asset remaining within fixed assets, and think I could make a reasonable case that there has been a deferred asset sale with legal title to be transferred on final payment. Accordingly maybe the entries are:

Dr Asset- but not fixed

Cr HP Creditor

 

Dr Debtors

cr Deferred asset sale

 

Then the key is can the Deferred asset sale be matched against the asset now or does it need to await the transfer of legal title.

I must admit I would have real difficulty treating the vehicle as an asset used by the company, so fairly sure it ought not to be reflected in fixed assets, and certainly not convinced it ever should be depreciated .

This is certainly one of these circumstances where looking behind the legal position to reflect the substance of the transaction is probably useful.

 

 

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By johngroganjga
14th May 2015 12:38

As an accountant I would suggest that the OP deal with this on a substance over form basis, as I have already advised. That is because that is what I would do in the same position.

BKD the reason why you do not see why there is a contingent liability is that you think the whole thing should be accounted for as if the purported sale had not occurred - presumably you would treat the receipts as hire charges. So when people say there is a disclosable contingent liability you don't understand because you think the actual liability is already on the balance sheet.

What you are missing is that those of us who say there is a contingent liability are in the camp who would offset all the receipts and payments and so recognise no asset or liability on the balance sheet.

All I would say about your idea that the purported sale should be ignored is that you are looking at it like a lawyer not an accountant. 

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Replying to Jdopus:
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By User deleted
14th May 2015 13:19

Agreed 50%

johngroganjga wrote:

What you are missing is that those of us who say there is a contingent liability are in the camp who would offset all the receipts and payments and so recognise no asset or liability on the balance sheet.

 

I would include all assets and liabilities separately for completeness

- the contingent liability I would include would just be a wordy note to the extent that the company is not currently realising interest charges as they are being recharged to a third party, but should the third party default the profitability would decrease.

 

I guess, to an extent, I am in both 'camps'

 

(I hate camping)

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Replying to [email protected]:
paddle steamer
By DJKL
14th May 2015 14:48

If you

BKD wrote:

BananaMan wrote:

 

- the contingent liability I would include would just be a wordy note to the extent that the company is not currently realising interest charges as they are being recharged to a third party, but should the third party default the profitability would decrease.

 

In the event of a default by the friend, profitability would decrease by far more than the interest element. If one insists on adopting the incorrect accounting treatment, the contingent liability should be the full amount of the remaining HP obligation.

If you debit Debtors/credit HP you have fully accounted for all liabilities under the contract, what you may/may not require to do is provide for bad debts if debtor does not pay.

This surely requires no contingent liability and is a fairly obvious way to reflect to economic substance of the transaction.. It would not be normal to treat debtors at year end as requiring a contingent liability.

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Replying to [email protected]:
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By User deleted
14th May 2015 14:56

Missing the point?

BKD wrote:

BananaMan wrote:

 

- the contingent liability I would include would just be a wordy note to the extent that the company is not currently realising interest charges as they are being recharged to a third party, but should the third party default the profitability would decrease.

 

In the event of a default by the friend, profitability would decrease by far more than the interest element. If one insists on adopting the incorrect accounting treatment, the contingent liability should be the full amount of the remaining HP obligation.

 

I think it's now yourself who is missing the point and [conveniently] chopped off the part of the quote that actually satisfies what you're getting at

BananaMan wrote:

I would include all assets and liabilities separately for completeness

- the remaining HP obligation would already be in there. Hence, no requirement for a contingency on that basis - only the amount that would hit the P&L

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By User deleted
14th May 2015 12:43

Substance over form

The substance is that the company has a legal obligation under a contract to make payments to the HP company. I refuse to accept that this can be shown as anything but an actual liability (creditor) of the company - and having spoken to accounts/audit colleagues they are in agreement.

There is less certainty over the treatment of the corresponding debit - it may well be that it should be shown as some form of deferred asset, with receipts being set against that. While some may have a fairly relaxed view about netting assets and liabilities, we do not.

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Replying to SJRUK:
By johngroganjga
14th May 2015 17:03

Netting off

BKD wrote:

While some may have a fairly relaxed view about netting assets and liabilities, we do not.

No-one is suggesting netting off an asset and a liability. The solution that you don't favour treats the HP repayments by the company as being made on behalf of the other party - which of course is exactly what the parties would say was happening if you were to ask them - so there is no asset or liability to account for, let alone net off.

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By johngroganjga
14th May 2015 12:53

Well the OP has both options to consider. Neither is wrong. One is practical and follows what the parties have agreed. The other is legalistic.

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By User deleted
14th May 2015 13:02

I think, John ...

... that you're assuming that only two parties are involved. One approach may well be 'legalistic' but as my colleagues have advised it would be wrong for a company to understate its legal obligations. What the "parties" may have agreed is irrelevant if that agreement is null and void. Just because one treatment is practical doesn't make it correct.

The reason that I don't favour the treatment referred to is because it is incorrect, regardless of what the parties may say. The company is not, as a matter of fact -never mind law - paying HP liabilities on behalf of the individual. It is paying its own HP liabilities, end of.

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By johngroganjga
14th May 2015 13:16

With respect BKD as we have no idea who your colleagues are using their reported views to add weight to your own is not helpful.

No-one has said that the company should understate its legal obligations. The worst case legal position is covered in the contingent liability disclosure that I have said should be included.

Your reference to the agreement being "null and void" is just another example of you clinging to legal form in the face of economic substance. You mean I think that you believe that if the parties fell out over it  a court would not uphold its terms. That may well be right, but that is not the point. What a court would decide is irrelevant. It is an agreement that is in fact being honoured to perfection by both parties and by which both parties presumably consider themselves bound. So it is certainly not a nothing.

 

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By User deleted
14th May 2015 14:09

Well, the substance over 'form' argument can stand only where the 'form' itself is a lawful one. In this case the arrangement (I mean the 'sale') is unlawful in that the limited company, which has got an asset under HP, cannot sell it. As simple as that. However, what has happened in substance is that an asset that the company acquired under HP is being used by someone and that someone makes a payment for it. So the accounting of it should be as a consideration for the use of the VAN. 

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Replying to Wanderer:
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By User deleted
14th May 2015 14:23

Or...

taxguru wrote:

Well, the substance over 'form' argument can stand only where the 'form' itself is a lawful one. In this case the arrangement (I mean the 'sale') is unlawful in that the limited company, which has got an asset under HP, cannot sell it. As simple as that. However, what has happened in substance is that an asset that the company acquired under HP is being used by someone and that someone makes a payment for it. So the accounting of it should be as a consideration for the use of the VAN. 

 

Or the receipts are split between Interest reimbursement and a payment on account in anticipation of a future sale?

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paddle steamer
By DJKL
14th May 2015 14:43

You can have a tax point for a sale

You can surely have a tax point for a sale before delivery of title/settlement, well certainly in Scotland re property this is the case.

We did a land sale 4 years ago where recorded title is still in our name (the sellers) and  over 30% of the price is still due to us. Despite these facts the sale was recorded via our accounts, we paid tax on the total price, and removed the asset (except for the remaining debtor) from our balance sheet. Conclusion of missives (contract becomes unconditional) triggered the tax point irrespective of land cert being issued to purchaser.

Might the same approach be applied to the contract to sell the vehicle, whether it is written or verbal it is , it appears, a contract. 

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By User deleted
14th May 2015 14:52

DJKL

You may be right but I don't think that it addresses the point. Whether or not there is an effective sale of the asset (which would give rise to a recoverable debt on the balance sheet) the fact remains that there exists a legal obligation to repay the HP company, which obligation must be recorded on the balance sheet - and not tucked away in a note on contingent liabilities. Because there is nothing contingent about it.

EDIT - posted before the second of your comments.

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Replying to petersaxton:
By johngroganjga
14th May 2015 15:06

Contingent

BKD wrote:

 Because there is nothing contingent about it.

It's contingent on the other party not paying it.

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Replying to lionofludesch:
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By User deleted
14th May 2015 16:17

Nonsense

johngroganjga wrote:

It's contingent on the other party not paying it.

No it's not  - the company has a contractual, not contingent, obligation to pay the HP company regardless of whether or not the other party makes good the instalments.

What the company may have [to disclose] is a contingent loss arising from the arrangements. But that is not the same as a contingent liability - not the same at all.

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Replying to petersaxton:
paddle steamer
By DJKL
14th May 2015 15:17

I concur

BKD wrote:

You may be right but I don't think that it addresses the point. Whether or not there is an effective sale of the asset (which would give rise to a recoverable debt on the balance sheet) the fact remains that there exists a legal obligation to repay the HP company, which obligation must be recorded on the balance sheet - and not tucked away in a note on contingent liabilities. Because there is nothing contingent about it.

EDIT - posted before the second of your comments.

I concur, whichever way it is wrapped up the company has the liability to the HP company and needs to reflect that liability on its balance sheet, it has no right of offset with the sum due from the friend, there are two contracts here.

Really I believe the only point of contention is how is the asset, vehicle ,recorded on the balance sheet? My view is it passes through the profit and loss account and only the debtor from friend and creditor to HP company remain at year end, the vehicle figures (sort of, see below) as security for the debtor.

Interesting question in whose name the registered keeper will be recorded, if in name of company  then friend may find it difficult to insure, if in name of friend then only thing stopping friend selling is it would not clear a check whilst the HP extant in name of the company.

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Replying to davidbarry:
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By User deleted
14th May 2015 15:43

.

taxguru wrote:

DJKL wrote:

Really I believe the only point of contention is how is the asset, vehicle ,recorded on the balance sheet?

The answer, without considering VAT is as follows:

Upon agreement for a VAN costing £10,000 payable in 24 payments of £500

Dr VAN Account - £10,000

Dr HP finance charges - £2,000

Cr HP Creditor (the monthly payments x £500 get debited here and credited to the bank)

 

P&L Account

Dr Finance charges for the year  (Cr HP finance charges)

Dr Depreciation (Cr VAN depreciation)

 

Balance Sheet

Fixed Asset

- disclose under fixed assets that the asset is under HP

 

Debtors

HP finance charges balance

 

Creditors

- divide HP creditor in to >1 year and less than <1 tear

 

There is no contingent liability - there are basically two contracts one HP and the other, well......!!!!!!!

 

 

Where do the entries for the receipts go??

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Replying to clark.hall:
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By User deleted
14th May 2015 15:44

Which ones?

BananaMan wrote:

Where do the entries for the receipts go??

Which receipts??

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Replying to groundy:
By johngroganjga
14th May 2015 15:46

Receipts

taxguru wrote:

Which receipts??

The payments to the company by the other party to the agreement.

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Replying to groundy:
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By User deleted
14th May 2015 15:48

OP

taxguru wrote:

BananaMan wrote:

Where do the entries for the receipts go??

Which receipts??

 

He's not even read the question

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Replying to clark.hall:
By johngroganjga
14th May 2015 15:44

Hire charges

BananaMan wrote:

Where do the entries for the receipts go??

Presumably hire charges received - P&L.

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Replying to davidbarry:
By johngroganjga
14th May 2015 15:43

Grandmother sucking eggs

taxguru wrote:

Upon agreement for a VAN costing £10,000 payable in 24 payments of £500

Dr VAN Account - £10,000

Dr HP finance charges - £2,000

Cr HP Creditor (the monthly payments x £500 get debited here and credited to the bank)

P&L Account

Dr Finance charges for the year  (Cr HP finance charges)

Dr Depreciation (Cr VAN depreciation)

Balance Sheet

Fixed Asset

- disclose under fixed assets that the asset is under HP

Debtors

HP finance charges balance

Creditors

- divide HP creditor in to >1 year and less than <1 tear

I think we know how to account for a plain vanilla HP contract without any unusual features, and it may be your view that the unusual features of this one should be ignored, which is fair enough, but I don't think it is necessary to teach one's grandmother to suck eggs :)

But thank you for the refresher.

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Replying to Chippy:
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By User deleted
14th May 2015 15:51

Eggs to the grandmother, and out!

johngroganjga wrote:
 the unusual features of this one should be ignored, which is fair enough, 

Leaving the eggs to the grandmother, the HP has no unusual features at all. Whatever the limited has done later with the VAN has got nothing to do with the HP contract.

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Replying to andrew1211:
paddle steamer
By DJKL
14th May 2015 16:37

But it does

taxguru wrote:

johngroganjga wrote:
 the unusual features of this one should be ignored, which is fair enough, 

Leaving the eggs to the grandmother, the HP has no unusual features at all. Whatever the limited has done later with the VAN has got nothing to do with the HP contract.

Whilst I agree with you re the creditor imho what the company does with the van has a significant bearing on whether or not there remains an asset, van, on the balance sheet

And given the company bought the van with intent to resell it, notwithstanding it is a van it should not be treated as a fixed asset even if it is construed the company still owns the van, stock for resale possibly but not a fixed asset.

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By johngroganjga
14th May 2015 17:01

BKD

You miss the point again. If one goes round the route, which I prefer, of recognising the substance of the transaction over its strict legal form, no actual liability is recognised, so all that is left is to disclose it as a contingent one. You are fixated on the idea that the accounts must be prepared in accordance with the strict legal form, which is a view that I understand and respect (although I would respect it more if you were not a self-confessed non-accountant) but do not agree with. On your basis of course the liability is recognised in the accounts and there is no contingency to disclose. 

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By User deleted
14th May 2015 17:12

John, you missed the point - not me

The liability that I quite clearly referred to in my previous point was the company's obligation to the HP company. On what basis do you consider that obligation to be contingent upon anything? You are referring to something else, methinks.

There is no question of fact, substance or form, that the company does have an actual contractual liability to the HP company. The only way of hiding that liability is to set against it the corresponding recoverable amount from the individual. I believe there is a phrase for that treatment. But even if you argue that the asset and liability never exist on the balance sheet, where does the contingent liability arise? Liability to pay whom? It can't be the HP company because that obligation already exists. As I said above, what you have is the possibility of a loss arising on the deal - that is not the same as a contingent liability.

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By johngroganjga
14th May 2015 17:29

Oh dear. Let me try again.

The substance is that the other party has taken over the liability to the HP company. So if you prefer substance over form that is the reality you reflect in the accounts you are preparing.

But it does not end there, because the company remains ultimately liable to the HP company in the event that the other party defaults. The substance of what is happening there is that the company is acting as guarantor of the other party's liability to the HP company. What type of liability is a guarantee?

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Replying to NH:
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By andy.partridge
14th May 2015 18:13

Full stop

johngroganjga wrote:

The company remains ultimately liable to the HP company in the event that the other party defaults.


No ifs or buts, the company is liable, full stop. Note that the friend is not making any payments to the HP company, officially or unofficially.
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By TerryD
14th May 2015 18:09

After all the deep thinking that has clearly gone into this apparently simple question, it is with some trepidation that I enter the fray. In my opinion what has happened is that the company has entered into a contract to sell this van with legal title passing at a future time. Constructive ownership appears to have passed to the friend who has access to future economic benefits accruing from use of the van. For me, that's enough to take it off the company's balance sheet. It's certainly enough to put it on the friend's, and I don't think it can be on both.

Similarly, the HP contract has constructively been assigned to the friend and so also disappears from the company's balance sheet.

Like John and others, I believe that the accounts should reflect the intentions of the parties, while still, of course complying with accounting standards. There are a number of instances in accounting standards where legal form has to be set aside in order to present a true and fair view - I believe this is one such case.

Clearly, though, the details of this contract, and the worst case scenario as it might affect the company,should be disclosed in he Notes (unless we're doing micro-entity accounts).

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By User deleted
14th May 2015 18:20

I see now

For 'substance over form' read 'fiction'.

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By johngroganjga
15th May 2015 07:58

Fiction?
Not fiction BKD. All firmly rooted in reality. I think your difficulty is in understanding that strict legal form is not the only reality.

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By User deleted
15th May 2015 08:32

Wrong

There can only ever be one reality. (Unless you're talking about events in a parallel universe.)

The parties may have agreed to sell an asset from one to the other. Because of HP constraints that sale cannot, in reality, have taken place. The only reality is that they think that a sale has taken place and want to treat it as if a sale has taken place. But to treat the transfer as having taken place, and to treat the HP obligations to have been taken over by the transferee, is nothing but fiction.

The reality is that the company continues to have a contractual obligation to the HP company and that the purported sale of the asset is void. That is the only reality.

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By johngroganjga
15th May 2015 08:47

Then you are at odds with accounting practice - but you are not an accountant are you, so perhaps that is just as well. See Terry's learned explanation of the principles set out above.  I couldn't have put it better. Terry is clearly an accountant and understand the issues. You however are not an accountant and do not understand the principles involved. You think of accountancy as if it were a branch of the law.

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By petersaxton
15th May 2015 08:57

My view

Taxguru's double entry is right. He does miss the receipts. These should be accounted for on the P&L a/c as income for use of van.

The van can't be sold or treated as sold unless legally able to do so.

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Replying to johnjenkins:
paddle steamer
By DJKL
15th May 2015 10:15

How does that work

petersaxton wrote:

Taxguru's double entry is right. He does miss the receipts. These should be accounted for on the P&L a/c as income for use of van.

The van can't be sold or treated as sold unless legally able to do so.

Sorry, why not? Is there something special about vans?

We, in the past, have exchanged missives to purchase a property and then exchanged missives to sell same, never taking possession of the property but having them both settle on same day.At no point have we got possession or title, the missives are a contractual right giving a right to sue for non delivery of title at future date and to be sued for non delivery at future date. This approach is the same with buying/selling shares using options, there is a contractual liability re future physical delivery. I have also (rarely) sold property where we have given the other party  entry and use of the property before settlement. (Issue with land registry in Scotland last Decemeber caused us to have to do this re the sale of three flats)

The key is then revenue recognition, at what point ought we to recognise  the sale, it is not on settlement/delivery? (consider rules re CGT and property as to where is the tax point- they do not consider legal title as the point, merely contractual liability) The fact is  I believe we want to recognise the transaction when the economic benefit passes, in the case of our van that is evidently when friend starts using it and has a contractual liability to pay us. It is at this point he takes all right to use and I presume all obligation to maintain.

We also need to think very carefully about what the accounts are there to do, what is their primary purpose?. To me it is to be true and fair, so then how is that best reflected? My opinion varies from John, I would recognise the HP creditor, as the company has that obligation to meet this irrespective of the financial performance of friend, and I would recognise the obligation of friend to pay the company, as they have an obligation to pay the company , so Debit Debtor/ Cr HP Creditor. But I would not recognise the van as an "asset" of the business, to so do would be to misrepresent the economic reality- the business does not need or use the van to operate.

If this was not a van, if this was say a  factory that previously had accounted for 50% of my company's output, and I sold it contractually on credit terms (I am to be paid up over 3 years) but retained legal title until fully paid (to protect myself re non payment, perhaps) and therefore my accounts no longer show half their output/sales as these now belong to the party operating the factory, would my accounts be reasonably stated showing the factory still on my balance sheet as a fixed asset?  The answer if evidently no.

With this van we have the same scenario, compounded by a third party lender having rights over the asset we have contractually sold. And what of depreciation- what is depreciation? It is not a reflection of reduction in value, or certainly I was not taught that view, it is surely a measure of the value to the business of the use of an asset over a period of time. If I treat the van as a fixed asset do I  depreciate it?  If I do I am charging the P& L for the use of an asset I am not using, not very true and fair.If I do not, am I distorting my accounts? Looked from the round, and the real economib position of the company, it is evident to me that the van should not be treated as a tangible fixed asset.

The trouble with the practice of accountancy is that it leads to a rules based approach. However sometimes a step back is required to not just look at the rules as they are but to why they are as they are. The profession has needed to react to substance over form issues(I once expressed to a firm of auditors how nonsensical I thought the requirement to treat preference shares as debt and accrued dividends as interest paid- I was probably wrong)

 It needs these sorts of discussions to revert back to the sorts of discussions one undertook if one studied accountancy in an academic setting (university) where studies went beyond the application of the rules to  why something is done- the philosophy of accountancy. Certainly ICAS training ignored the why and merely encouraged, learn the rules for the exams.

I was in touch recently with my former tutor from Aberdeen to ask where, these days, one might find the sorts of articles that in the 1980s littered the pages of ICAS's "The Accountants Magazine" , these types of articles I believe have also left the pages of the former ICAEW magazine, Accountancy. In the 1970s and 1980s the profession debated such issues, articles by W Baxter et al debated the whys of accountancy; maybe a bit more of such debate is required before everyone turns into a mere box ticker.

 

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By User deleted
15th May 2015 09:46

I'll treat those comments, John ...

... with the contempt that they deserve. I may not be an accountant these days, but my audit and accountancy partners certainly are. I have no idea of Terry's credentials, nor indeed your own, but my colleagues' qualifications and expertise are not in doubt. Again, I may not be an accountant myself but I do understand the FRS definitions of a contingent liability (as opposed to a contingent loss). In the interests of [***]-for-tat, I'm not sure that you do.

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Replying to njpandya:
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By User deleted
15th May 2015 10:17

:O

BKD wrote:

... with the contempt that they deserve. I may not be an accountant these days, but my audit and accountancy partners certainly are. I have no idea of Terry's credentials, nor indeed your own, but my colleagues' qualifications and expertise are not in doubt. Again, I may not be an accountant myself but I do understand the FRS definitions of a contingent liability (as opposed to a contingent loss). In the interests of [***]-for-tat, I'm not sure that you do.

 

Did he just use the word [***] on a professional forum?...

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By TerryD
15th May 2015 10:08

Lert's put this another way

If we follow the argument supported by BKD, petersaxton, et al that legal title is the only criterion to be considered, then how could this company even consider putting this van on its balance sheet since, as it is under HP, the company does not have legal title to it. So all companies that have assets held under HP on their balance sheets are wrong. And what about all those companies that buy stock under a Romalpa clause? According to Peter they cannot put such stock in their shop window until they have paid their supplier as they do not have legal title to the goods so can't sell them.

Hang on a minute while I ring PWC and tell them that they've been signing off on accounts that are wrong for all these years.

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By petersaxton
15th May 2015 10:20

SSAP 21

Don't ring PWC because they are not wrong.

I didn't say that legal title is the only criterion to consider.

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