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Therefore, be careful about intragroup transactions,
REVENUE RECOGNITION: CONTRACTS WITH as they often lack a commercial substance (as these
CUSTOMERS companies often transfer inventories and other items
at prices different than the market).

WHAT IS THE OBJECTIVE OF IFRS 15?

Step 2: Identify the performance obligations in the
● IFRS 15 sets the principles to apply when reporting
contract
about:
● Performance obligation is any good or service that a
o the nature;
contract promises to transfer to the customer. It can
o the amount;
be either (IFRS 15 App. A)
o the timing; and
o A single good or service, or their bundle that is
o the uncertainty of revenue and cash flows from a
distinct; or
contract with a customer.
o A series of distinct goods or services that are
● Let me stress “a customer” here. If you have a
substantially the same and have the same
contract with a party other than a customer, then
pattern of transfer.
IFRS 15 does not apply.
● An essential characteristic of a performance
obligation is the word “distinct”. Simply said, distinct
5 steps to recognize revenue under IFRS 15
means separable, or separately identifiable, and IFRS
● The main aim of IFRS 15 is to recognize revenue in a
15 sets criteria that you must assess in order to
way that shows the transfer of goods/services
determine whether the performance obligation is
promised to customers in an amount reflecting the
distinct or not. Let me say that this is extremely
expected consideration in return for those goods or
important and you must do it right.
services.
● The reason is that in further steps, you will account for
● It seems understandable and very easy at first sight,
distinct performance obligations and their revenues
and it truly is in many cases. So why is IFRS 15 so
separately, in line with their allocated transaction
extensive?
price, and if you fail in the correct identification of
● Well, because many situations are not straightforward
distinct performance obligations, then the whole
and entities recognize revenues differently in these
contract accounting will be wrong.
cases, for example:
● Let me also add that the performance obligations
• Buy 1+get 1 free;
can be both explicit (e.g. written in the contract) and
• Buy monthly prepaid plan + get handset for free;
implicit (e.g. implied by some customary practices).
• Earn loyalty points and cash them out/receive free
● Also, if there’s no transfer to customer, then there’s no
goods later on;
performance obligation. For example, imagine you
• Get bonuses for delivery on time; etc.
construct a building for your client. Before you
● To make it systematic, IFRS 15 requires application of actually start, you build a small mobile toilet for your
a 5 step model for revenue recognition.
workers. As this will not be delivered to your customer,
it is not a separate performance obligation.
Step 1: Identify the contract with the customer
● A contract is an agreement between 2 parties that Step 3: Determine the transaction price
creates enforceable rights and obligations (IFRS 15,
● The transaction price is the amount of consideration
Appendix A).
than an entity expects to be entitled in exchange for
● You need to apply IFRS 15 to all contracts that have
transferring promised goods or services to a
the following 5 attributes (IFRS 15.9):
customer, excluding amounts collected on behalf of
1. Parties to the contract has approved it and are
third parties (IFRS 15 Appendix A).
committed to perform;
● That’s the definition from the standard and in other
2. Each party’s rights to the goods/services
words, it’s what you expect to receive from your
transferred are identified;
customer in return for your supplies.
3. The payment terms are identified;
● Attention – it’s NOT always the price set in the
4. The contract has a commercial substance; and
contract. It is your expectation of what you receive. It
5. It is probable that an entity will collect the
means that you need to estimate the transaction
consideration – here, you need to evaluate the
price.
customer’s ability and intention to pay.
● First, you need to take the price stated in the
● So, if the contract does not meet all 5 criteria, then
contract as some basis (if applicable).
you don’t apply IFRS 15, but some other standard.

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● Then, you need to take some items into account, o At the point of time – in this case, control is
such as: retained by the supplier until it is transferred at
o Variable consideration – are there some bonuses some moment.
or discounts, for example, performance bonus?
o Constraining estimates in variable consideration Two types of costs related to the contract
– you should include variable consideration (e.g. ● Except for these 5 steps, IFRS 15 arranges a few other
bonus) in the transaction price only when it’s areas, such as… Contract costs
highly probable that you can keep it (this is a big ● IFRS 15 provides a guidance about two types of costs
simplification); related to the contract:
o Significant financing component – if your clients 1. Costs to obtain a contract
will pay you with delay, do the payments reflect o Those are the incremental costs to obtain a
the time value of money? contract. In other words, these costs would not
o Non-cash consideration – do you receive some have been incurred without an effort to obtain a
non-cash items from your customer in return for contract – for example, legal fees, sales
your goods or services? commissions and similar. These costs are not
o Consideration payable to a customer – do you expensed in profit or loss, but instead, they are
provide some vouchers or coupons to your recognized as an asset if they are expected to
customers? be recovered (the exception is the contract
o And other factors. costs related to the contracts for less than 12
months).
Step 4: Allocate the transaction price to the performance 2. Costs to fulfill a contract
obligations o If these costs are within the scope of IAS 2, IAS 16,
● Once you have identified the contract‘s IAS 38, then you should treat them in line with the
performance obligations and determined the appropriate standard. If not, then you should
transaction price, you need to split the transaction capitalize them only if certain criteria are met.
price and allocate it to the individual performance
obligations. REVENUE RECOGNITION: FRANCHISE CONTRACTS
● The general rule is to do it based on their relative
stand-alone selling prices, but there are 2 exceptions Initial franchise fee
when you allocate in a different way: ● contractual consideration for the franchise and initial
1. When allocating discounts, and services to be rendered by the franchisor
2. When allocating considerations with variable
amounts. Continuing franchise fee
● A stand-alone selling price is a price at which an ● a charge for continuing services rendered to the
entity would sell a promised good or a service franchisee; recognized as revenue when continuing
separately to the customer (not in the bundle). The services are rendered.
best way to determine a stand-alone selling price is
simply to take observable selling prices and if these Initial direct cost
are not available, then you need to estimate them. ● necessary cost to transfer the franchise and the
IFRS 15 suggests a few methods for estimating know-how embodied in it. Deferred and expensed in
stand-alone selling prices, such as adjusted market the period the relevant franchise fee is recognized
assessment approach, etc.
Indirect cost
Step 5 Recognize revenue when (or as) the entity satisfies ● cost that cannot be traced to a particular franchise
a performance obligation contact; expensed in the period incurred

● A performance obligation is satisfied (and revenue is

recognized) when a promised good or service is
transferred to a customer. This happens when control
is passed.
● A performance obligation can be satisfied either:
o Over time – in this case, control is passed to the
customer over some period of time (e.g. contract
ACCOUNTING METHODS
term); or

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A. Initial services is substantially completed Construction contract
1. Accrual Method ● a contract specifically negotiated for the
○ revenue is recognized upon completion construction of an asset or a combination of assets
of substantial performance; used when that are closely interrelated or interdependent in
realization of the revenue is reasonably terms of their design, technology and function or their
assured. ultimate purpose or use

2. Installment Method Types:

○ revenue is recognized based on 1. Fixed price contract
collection; used when realization of the ○ a construction contract in which the
revenue is not reasonably assured contractor agrees to a fixed contract
price, or a fixed rate per unit of output,
3. Cost Recovery Method which in some cases is subject to cost
○ collection is deemed recoveries of cost; escalation clauses
excess collection over cost is deemed 2. Cost plus contract
profit; used when realization of the ○ a construction contract in which the
revenue is uncertain contractor is reimbursed for allowable or
otherwise defined costs, plus a
B. Deposit Method – initial services not yet substantially percentage of these costs or a fixed fee
completed
Combining and Segmenting Construction Contracts
● Construction accounting is generally applied on a
FRANCHISE REVENUE RECOGNITION METHODS
per-construction contract basis but construction
contracts may be combined or segmented under
certain conditions.

Segmenting of construction contracts

● When a contract covers a number of assets, the
construction of each asset shall be treated as a
separate construction contract when:
1. separate proposals have been submitted for
each asset;
2. each asset has been subject to separate
Exception before substantial performance: negotiation and the contractor and customer
The franchisor may recognize part of the initial franchisee have been able to accept or reject that part of
fee when: the contract relating to each asset; and
1. non-refundable down payment was received 3. the costs and revenues of each asset are
and identifiable
2. the downpayment commensurate to the extent
of services already incurred Combination of construction contracts
● A group of contracts, whether with a single customer
Exception after substantial performance: or with several customers, shall be treated as a single
1. The franchise contract provides for a conditional construction contract when:
buy-back agreement. 1. the group of contracts is negotiated as a single
2. The grant is subject to refund which is still package;
outstanding 2. the contracts are so closely interrelated that they
3. The franchise may be cancelled subject to a are, in effect, part of a single project with an
contingency which has not yet been prescribed. overall profit margin; and
3. the contracts are performed concurrently or in a
continuous sequence

A contract may provide for the construction of

REVENUE RECOGNITION: CONSTRUCTION CONTRACTS an additional asset at the option of the customer or may

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be amended to include the construction of an additional 2. variations in the contract work, claims and
asset. The construction of the additional asset shall be incentive payments
treated as a separate construction contract when: a. to the extent that it is probable that they will
1. the asset differs significantly in design, result in revenue
technology or function from the asset or assets b. they are capable of being reliably measured
covered by the original contract; or
2. the price of the asset is negotiated without CONTRACT COSTS – comprises of:
regard to the original contract price 1. costs that relate directly to the specific contract
a. site labor cost and supervision
Construction Terminologies b. cost of materials used
c. depreciation of PPE
Progress billings d. cost of hiring PPE
● amounts billed by the contractor as charges for e. moving cost of PPE and materials
construction activities done to/from site
f. estimated cost of rectification and
Retention Fee guarantee work
● portion of the progress billing that is withheld by the g. cost of design and technical
customer pending satisfaction of an agreed assistance
condition h. claim from third parties

Mobilization fee 2. costs that are attributable to contract activity in

● an advance given by the customer to the contractor general and can be allocated to the contract
a. insurance
Contract work in progress b. cost of design and technical
● contract costs that relate to future activity assistance not directly related to specific
contract
Variation c. construction overheads
● an instruction from the customer for a change in the 3. such other costs as are specifically chargeable to
scope of the work to be performed under the the customer under the terms of the contract
contract
Costs not included in contract costs:
Claim 1. Contract work in progress
● an amount the contractor seeks to collect from the 2. Advanced payments to subcontractors
customer or another party as reimbursements for cost 3. Others like:
not included in the contract price a. General administration costs
b. Selling costs d. Depreciation of idle PPE not
Incentive payments used on a particular contract
● additional amounts paid by the contractor if c. Non-reimbursable R&D expenses
specified performance standards are met or
exceeded METHODS OF ACCOUNTING

Penalties I. Percentage of Completion Method

● reduction in revenue for failing to meet client ● used when the outcome of construction activity can
specifications be reliably measured:
A. Fixed price contract – outcome of construction
The primary issue in accounting for construction contracts activity can be reliably measured if:
is the allocation of contract revenue and contract 1. total revenue can be measured reliably
costs to the accounting periods in which construction 2. probable economic benefits will flow to
work is performed. the entity
3. contract cost to complete and stage of
contract completion, determinable
CONTRACT REVENUE – comprises of:
4. contract cost to the contract can be
1. the initial amount of revenue agreed in the
identified and measured reliably
contract and
B. Cost plus contract – outcome of construction
activity can be reliably measured if:

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1. it is probable economic benefits will flow Financial Statement Presentation
to the entity ● An entity shall present:
2. contract cost to the contract can be a. the gross amount due from customers for
identified and measured reliably contract work as an asset; and
b. the gross amount due to customers for contract
Under Percentage of Completion Method work as a liability
a. revenue is recognized based on the extent of
completion The gross amount due from customers for contract work is
b. contract costs incurred during the period is the net amount of:
expensed a. costs incurred plus recognized profits
(construction in progress); less
Stage of completion may be determined using: b. the sum of recognized losses and progress billings
1. cost-to-cost method for all contracts in progress for which costs
2. survey of work done incurred plus recognized profits(less recognized
3. completion of physical proportion of the work losses) exceeds progress billings
done
The gross amount due to customers for contract work is
II. Completed Contract Method the net amount of:
● also known as zero-profit method, is used when the a. costs incurred plus recognized profits
outcome of a construction activity cannot be reliably (construction in progress); less
measured b. the sum of recognized losses and progress billings
● Under completed contract method for all contracts in progress for which progress
a. revenue is recognized up to the extent of contract billings exceed costs incurred plus recognized
cost incurred and recoverable profits (less recognized losses)
b. contract costs are expensed in the period in which
they are incurred Disclosures
● An entity shall disclose:
EXPECTED CONSTRUCTION LOSS a. the amount of contract revenue recognized as
Regardless of the accounting method used, expected revenue in the period;
losses are recognized as an expense immediately b. the methods used to determine the contract
irrespective of: revenue recognized in the period; and
1. work has not yet commenced on the contract c. the methods used to determine the stage of
2. stage of completion or activity or completion of contracts in progress
3. the amount of profits expected on other ● An entity shall disclose each of the following for
contracts which are not treated as a single contracts in progress at the balance sheet date:
contract a. the aggregate amount of costs incurred and
recognized profits (less recognized losses) to
date;
b. the amount of advances received; and
c. the amount of retentions

PARTNERSHIP LIQUIDATION BY LUMP SUM

LIQUIDATION OF A PARTNERSHIP
● The liquidation of a partnership means discontinuing
its activities
FINANCIAL STATEMENT PRESENTATION AND DISCLOSURE

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● The procedures usually include selling assets, paying Assume that Abra and Barg, who share income/losses
liabilities, and distributing any remaining cash to the equally decide to liquidate Abra and Barg LLP. A
partners balance sheet on 6/30/x9, just prior to liquidation follows:
● The liquidation process often starts with the realization
of non cash assets ABRA & BARG
● Any gains or losses resulting from the assets realization Balance Sheet
are divided among partners based on the income June 30, x9
sharing ratio
● The capital balances after the allocation of ASSETS LIABILITIES & PARTNER’S CAPITAL
gains/losses are the basis for settlement Cash 10,000 Liabilities 20,000
● No cash can be distributed to partners until all Other assets 75,000 Loan Payable to
liabilities are paid off Barg 20,000
Abra, Capital 40,000
DISTRIBUTION OF CASH OR OTHER ASSETS TO PARTNERS Barg, Capital 5,000
● However, if a partner’s capital account has a deficit, Total 85,000 Total 85,000
that partner’s loan to the partnership must be offset
against the deficit in his/her capital account (referred Additional information:
to as the right of offset). ● The non cash assets with a carrying amount of
● Thus, the cash received by a partner is the same as if $75,000 realized cash of $35,000
loans to the partnership has been recorded in the ● The loss of $40,000 is divided equally by the
partner’s capital account partners
● The existence of partner’s loan account will not ● After the allocation of realization loss, Barg’s
advance the time of payment of any partner during capital has a deficit of $15,000
the liquidation
● Consequently, the loan to the partnership is often Statement of Realization and Liquidation for Abra & Barg
treated as capital during the liquidation LLP
● It is possible that partners are willing to receive assets
other than cash for settlement Assets Partner’
● Regardless whether assets other than cash are Capital
distributed to partners, the distribution rule must be
Cash Other Liab Barg Abra Barg
followed. ilitie , (50%) (50%)
s loan

Balances $10,0 $75,00 $20, $20, $40,0 $

before 00 0 000 000 00 5,000
liquidatio
n
Realizatio 35,00 (75,00 (20,0 (20,00
n of 0 0) 00) 0)
other
assets at
a loss of
$40,000
Balances $45,0 $20, $20, $20,0 $(15,0
00 000 000 00 00)

Payment (20,00 (20,

to 0) 000)
creditors

Balances $25,0 $20, $20,0 $(15,0

00 000 00 00)

Offset (15,0 15,00

PAYMENT TO PARTNERS AFTER ALL NON CASH ASSETS Barg’s 00) 0
REALIZED capital
deficit
against
A. Equity of each partner is sufficient to absorb loss from Barg’s
realization loan

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Balances $25,0 $5,0 $20,0 $ -0-
00 00 00

Payment (25,00 (5,00 (20,0 $ -0-

s to 0) 0) 00)
partners

Note to the statement of realization and liquidation for

Abra and Barg LLP
● Partners Abra and Barg received $20,000 and
$5,000, respectively, after partnership creditors
had been paid in full
● The checks to both partners should be delivered
to the partners at the same time
● In the following examples, a partner’s loan
account balance (if any) is combined with the
partner’s capital account balance in the
statement of realization and liquidation.

CORPORATE LIQUIDATION
● For a corporation, the most common reason for its
liquidation is when it is financially distressed or
bankrupt and unable to meet its outstanding
obligations as they become due.

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● As defined by law, insolvency exists when the claims are satisfied in full, if possible, from the sale
aggregate properties of the business is less than its of non-collateralized assets. Unsecured creditors
total liabilities. Thus, it may be liquid in the sense that without priority receive cash in proportion to the
there is sufficient cash to pay its current obligations amounts of their claims from the remaining
but it may also be insolvent, as contemplated by law, proceeds of realization of the debtor's assets.
if its total liabilities exceed its total assets.
As regards to no. 2 described above, the claims that are
COURSE OF ACTION - TO REHABILITATE OR TO LIQUIDATE given priority and have to be liquidated in full, before
● The bankruptcy system must help rehabilitate the claims of other unsecured creditors can be satisfied, are
debtor-firms otherwise the economy of the country as follows:
will suffer. Closure of firms will mean mass lay off, 1) The costs and expenses of administration,
creditors will not be paid, business with suppliers will including the actual and necessary costs and
be cut and other businesses affected by the expenses of preserving the debtor's estate after
bankrupt company's service/product would also be filing the petition. Among these costs and
adversely affected. The firm may undertake expenses would be referee's salary and
reorganization or liquidation, voluntarily with the expenses, filing fees, attorney's and trustee's fees,
officers of the insolvent firm filing a petition in court or expenses of recovering concealed or
the creditors could go to court and file for an fraudulently transferred assets, etc.
involuntary bankruptcy petition against the firm. 2) Wages and commissions to each claimant, that
● The following courses of actions may take place have been earned within three months before
when the insolvent firm and its creditors agree to: the date of commencement of proceedings,
a) quasi-reorganization through revaluation of due to workmen, servants, clerks, or traveling or
properties or recapitalization city salesmen.
b) troubled debt restructuring 3) Costs and expenses of creditors successful in
c) bankruptcy liquidation having the confirmation of an arrangement or
d) equity receivership wage-earner plan or bankrupt's discharge
refused, revoked, or set aside; or securing the
COURSE OF ACTION - TO REHABILITATE OR TO LIQUIDATE conviction of any person for a bankruptcy
● As a last resort, where the possibility of recovery by offense.
the business is remote or the possibility of loss to the 4) Taxes legally due and owing by the bankrupt to
creditor is so great, the creditors may organize the Government or any of its subdivision or
themselves and take control of the insolvent firm's instrumentalities.
assets in an attempt to control their interests. It should 5) Debts owing to any person entitled to priority by
be observed that any attempt of the debtor-business laws; and also rent for actual use and
to effect a settlement without recourse to courts may occupancy, accrued within three months before
be construed as an act of bankruptcy and thus may the date of bankruptcy, owing to a landlord who
be made the basis for commencement of involuntary is entitled to priority under applicable law.
bankruptcy proceedings. It is better however that
claims be settled resulting in bankruptcy actions. Although bankruptcy is a means of securing release from
After the bankruptcy proceedings, the debtor is past obligations, such a release is not applied to all forms
discharged of most of his debts and he may start with of debt. Certain obligations continue in effect and must
the rehabilitation of the business. The bankruptcy still be paid after formal discharge of the debtor.
proceedings involves the sale of non-cash assets of
the beleaguered enterprise and distribution of the The bankrupt-business is not released from the following:
cash proceeds to the creditors. The following rules for 1) Taxes due to the government.
the payment of obligations, in the order of priority, 2) Liabilities for obtaining money or property by
should be observed: false pretenses or false representations, for willful
1) Creditors having security interests (meaning and malicious injuries to the person or the
certain assets have been pledged as security to property of another, for alimony or for
them) are generally entitled to a satisfaction of maintenance or support of a wife or child, that is
their claims from the assets pledged. due or to become due, etc.
2) Certain creditors known as creditors with priority 3) Debts not duly scheduled in time for proof and
or preferred creditors without security are entitled allowance when a creditor had no notice or
by law to priority treatment. It means that their actual knowledge of bankruptcy proceedings.

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4) Debts created by fraud, embezzlement, financial position and the status of the creditors with
misappropriation, or defalcation while the debtor respect to the insolvent assets. This is accomplished
was acting as an officer or in any fiduciary with the preparation of a Statement of Affairs.
capacity. ● The purpose of this statement is to present the assets
5) Wages, salaries, or commissions earned within and liabilities of the debtor enterprise from a "quitting
three months before the date of concern" viewpoint therefore the assets should be
commencement of proceedings due to valued at the current fair values while its carrying
workmen, servants, clerks, or traveling salesmen. amounts or book values are presented on a
6) Money of an employee received or retained by memorandum basis. Additionally, the assets and
an employer to secure the faithful performance liabilities are classified according to the rankings and
of the terms of a contract of employment. priorities as set forth in the Bankruptcy Code. From
the viewpoint of the creditors, specially the
The adjudication of a person or a business entity as a unsecured creditors, this statement helps them
bankrupt operates as an application decide on what course of action to take against the
for his discharge in bankruptcy. A bankrupt will be denied insolvent debtor. It may also be requested by a
a discharge if found guilty of certain receiver or trustee as a means of informing creditors
actions such as: of the possible outcome of any course of action.
1) Destroyed, mutilated, falsified, concealed, or in
certain cases failed to keep or preserve books of The main sections of a statement of affairs are as follows:
accounts or records. ● Assets:
2) Obtained money or property on credit, or o Assets pledged with fully secured creditors
obtained an extension or renewal of credit, by a o Assets pledged with partially secured creditors
materially false statement in writing as to his o Unpledged or free assets
financial condition. ● Liabilities:
3) Transferred, removed, destroyed, or concealed o Preferred, but unsecured creditors
any of his property with intent to hinder, delay or o Fully secured creditors
defraud creditors within twelve months prior to o Partially secured creditors
the filing of the bankruptcy petition. o Unsecured (unpreferred) creditors
4) Refused to obey any lawful order of, or answer o Contingent liabilities (if any)
any material question approved by the court. ● Capital:
5) Failed to explain satisfactorily any losses of assets o Share Capital
or deficiencies of assets to meet his liabilities. o Deficit
6) Was granted a discharge or had a composition o Appropriated retained earnings
confirmed under the Act in a bankruptcy
proceeding commenced within six years prior to Assets Pledged with Fully Secured Creditors
the date of the filing of the bankruptcy petition. ● under this heading is listed any asset that is expected
to realize an amount equal to or in excess of the
All these proceedings starting from the preservation of balance of the claim on which it has been pledged
assets to sale of non-cash assets and payment of liabilities as security.
are under a receiver or marshal who may be appointed
by the court. A referee who is an officer of the court
Assets Pledged with Partially Secured Creditors
supervises and reviews the proceedings. Creditors must
● under this heading is listed any asset that is expected
prepare a statement setting forth their claims as well as
to realize an amount lower than the balance of the
other relevant information to such claims or property
claim on which it has been pledged as security.
pledged on the claim.

Unpledged or free assets

STATEMENT OF AFFAIRS ● under this heading is listed any asset that has not
● The going concern assumption which is primarily one been pledged as security and therefore not related
of the principles underlying the preparation of the to any individual liability item.
financial statements is abandoned when bankruptcy
proceedings is the only recourse of a corporation Preferred Creditors
which is in severe financial trouble. The accountant
must prepare a report concerning the insolvent

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● under this heading is listed any claim that, by law,
must be provided for in full before anything may be
paid on remaining unsecured claims. Based on
Section 50 of Insolvency Law.

Fully Secured Creditors

● under this heading is listed any claim on which there
is a pledge of certain property that is expected to
realize as much or more than the amount of the
claim.
Notes:
Partially Secured Creditors Recovery Percentage = Net free assets/Unsecured
● under this heading is listed any claim on which there without priority.
is a pledge of certain property that is expected to Payments to:
realize less than the amount of the claim. Fully secured creditors = 100%
Partially secured creditors:
Secured part = 100%
Unsecured Creditors
Unsecured part = unsecured part x
● under this heading is listed any claim that carries no
recovery %
legal priority and on which there is no property
Unsecured with priority = 100%
pledged.
Unsecured without priority = unsecured without priority x
recovery %
Contingent Liabilities
• Three (3) years to liquidate
● under this heading is listed any contingent liability • The extinguishment of juridical personality
which is expected to develop into an actual liability, happens in dissolution
otherwise it has no place in the statement of affairs.
VALUATION
Share Capital 1. Asset – Fair Value
● under this heading is shown the issued and 2. Liabilities – Maturity Value (Principal + Interest)
outstanding shares.
Percentage of = Net Free
Retained Earnings Assetsdahjdhajj
● under this heading is shown the balance of the Recovery (POR) Total Unsecured Creditors
retained earnings or deficit. Without Priority

STATEMENT OF REALIZATION AND LIQUIDATION ACCOUNT

Appropriated Retained Earnings
The realization and liquidation account is essentially a
● under this heading is listed all appropriations from
statement of accountability reflecting the activities of the
retained earnings.
fiduciary - either a receiver or a trustee - in converting the
debtor's non.com assets and proceeding with the orderly
ESTIMATED CLAIM SETTLEMENT
distribution of the proceeds in settlement of the debtor's
● In estimating claim settlement, the balance sheet
several liabilities. To this report is normally appended the
shall be restated to valuation relevant for liquidation:
fiduciary's cash account. The orthodox report form
a. Assets = net realizable values (estimated selling
consists essentially of three principal divisions.
prices less disposal expenses)
b. Liabilities = estimated settlement values
*NOTE: Statement of Realization → no cash

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STATEMENT OF REALIZATION AND LIQUIDATION

Assets to be realized (ATBR)

● Non cash assets, beg.
Assets acquired (AA) / increase on Asset
● Interest Receivable
● Accounts receivable

Liabilities liquidated (LL)

Liabilities not liquidated (LNL)
● Ending balance of the liabilities

Supplementary charges /expenses

● Cost of sales
● Accrued expenses
NET INCOME/LOSS

Assets realized (AR)

● PPE – net proceeds
● Receivables – collection

Assets not realized (ANR)

● Non Cash asset, end.

Liabilities to be liquidated (LTBL)

Liabilities assumed (LA) /
● Accrued Expenses
● Accounts Payable

Supplementary credits / revenue

● Sales
● Accrued Interest Income
NET LOSS/LOSS

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