By David Lavine, CPA
Director, Kaulkin Ginsberg
A small accounting change by the Financial Accounting Standards Board (FASB) will have a big impact – especially for debt buyers looking to secure financing to purchase new inventory.
Starting this fiscal year (2008), accounting standard “FASB 159” allows a company to report certain assets at fair market value rather than at cost. If your company purchases debt, it clearly meets the ‘substance over form’ criteria of the FASB.
This means that you can present the market value of the portfolios you own under management, thus increasing the equity amount of the business. This reflects a much clearer picture of the true equity of the enterprise. Balance sheet management can now be based on market value, as it should be.
This can be enormously useful when valuing your enterprise to determine equity for financing, for dispute resolution, or in preparation for a company sale. We are already assisting one portfolio debt buyer with a valuation of their accounts to provide their accountants for their FY 2007 financial statements. I strongly suggest that everyone with purchased debt explore this option with their professional advisor.
Most debt buyers have no idea that this option is available to them. Spread the word!
David Lavine is the leading valuation expert in the credit and collection industry. He provides business valuation, litigation support, and other advisory services to select clients. For a confidential discussion of your needs, contact David at 240-499-3812 or by email.