Sorry for the vagueness perhaps of this question, I know, or at least I thought I knew, how one arrived at a figure for shareholder funds / net assets.
I am having an argument with a client whose limited company's accounts were in the red by quite a bit at the last year end, and I know that the current position is the same, they are in the red. However, during the year the client, themselves, made an application for a government contract, and they clearly stated on the application that they were in the black, and quoted a figure.
The application form asked, that if the shareholders funds / net assets were negative, what assurances were available on the future solvency of the business. The client has stated in the application that some loans had been waived, but more importantly that future fuunding will be available though "advances" as per a letter from a strategic funding partner. These advances have been included in the grant application as part of shareholders funds / net assets.
My question is: Is there an accounting definition somewhere in GAAP, FRS's SSAP'sor somehwre else that states what can or can not be included in Shareholder funds / net assets. Unfortunately, all that I have is a copy of the apllication form showing one figure for Shareholder funds, which includes the rather subsatantial "advance".
Any ideas, or if you can point me to a recognised accounting definition.