Presentation of Amounts Received Under Channel Financing Facility as per Schedule III to the Companies Act, 2013
- Blog|News|Account & Audit|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 30 December, 2023
Latest from Taxmann
A company dealing in consumer durables has provided an optional channel financing facility to all its dealers and distributors (D&D) for sanction of working capital limits. The limits sanctioned have the following hypothecations/security-
- Primary: Against all stocks, receivables and current assets of the D&D
- Collateral: First loss default guarantee (FLDG) by the Company
- Guarantee: of D&D
The FLDG and channel financing facility are two separate arrangements. In this FLDG arrangement, D&D is not a party to the same. The accountant believes the following will be the probable accounting treatment in the following two events-
(a) In case of no default done by D&D during the credit period: Sums received from Bank can be construed as financial guarantee liability and can be presented and disclosed as other current financial liabilities at the reporting date.
(b) In case of default done by D&D on due date: Such sums not paid by D&D on due date and remaining not paid at the reporting date can be interpreted for presentation and disclosure as borrowings, as these can be termed as loans payable on demand.
The company approached the Expert Advisory Committee (EAC) to affirms its accounting treatment in the above two events. This story covers the major pointers of the channel financing facility and presentation of amounts received from bank under channel financing facility by the company in case of default by dealers on due date or in case of no default during the credit period.
Click Here To Read The Full Story
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
CA | CS | CMA
