Restricted Cash - the problem

There is no doubt that Apple is the company's critics love to hate corporate cash hoarding, STI cash on the balance sheet with approximately $ 38billion

But Goliath computing staff as possible to hang on to as much of the green stuff is not alone in his choice. Since the recession,  the growth in a  company's cash holdings has been statoshpehric.

According to data culled by Georgia Tech Financial Analysis Lab, the average cash and short-term investments of 3,000 largest public companies in June 2009 went up by 28.9% from $ 66 million in September  2013  to $ 86 million.

Briefly criticisms of excessive cash retention, Charles Mulford, a Georgia Tech accounting professor who runs the lab, says "cash is a non-productive asset." Instead, it has been said so much cash, corporations, may hold on plants, equipment and such things as hiring investment - generating more growth in the sluggish economy.

Many investors look to cash in on the huge cache of non-productive corporate financial. .

Such allocation they 'cash and cash equivalents (CCE), as well as short-term, highly liquid investments is defined as the analysts mention that the cash balance, be excluded from spreading. Under the rules of the Securities and Exchange Commission, although , restricted cash should be reported separately and its purpose is described in the footnotes to the financial statements.

To be sure, most of the restricted cash amount does not amount to a material financial statement.

That said, restricted cash, can amount to a significant chunk of change "and for some companies, it's the content," says Mulford. Georgia Tech's average cash amount of $ 102000000 for the sample is restricted. Ke $ 1500000000 for Chevron restricted group had the most amount of cash.

Restricted cash balances rise or fall as follows Unrestricted cash goes in the opposite direction. "Restricted cash goes down, it is free to do something else unrestricted cash," Mulford changes in restricted cash balances reported on the statement of cash flows that says noting.

This classification approach may be restricted cash due to the limited number of companies suggest that being buttressed by finding a Georgia Tech. "We restricted cash and cash flow statement classification of the change in cash among the main reasons for the restrictions placed on the general stability," the report's authors write.

Will the cloud be embedded in your books

Cloud computing is here to stay & estimates forecast the industry to be 11B dollar industry in the next two years.

Fundamentally, cloud computing converge infrastructure and shared services. This type of data center environment allows enterprises to get their applications up and running faster, with easier manageability and less maintenance, and enables IT to more rapidly adjust IT resources (such as servers, storage, and networking) to meet fluctuating and unpredictable business demand.

Most cloud computing infrastructures consist of services delivered through shared data-centers and appearing as a single point of access for consumers' computing needs. Commercial offerings may be required to meet service-level agreements (SLAs), but specific terms are less often negotiated by smaller companies.

Refer to my earlier discussions on embedded leases , the cloud now sits as a prime target of a financial lease. With more and more corporates outsourcing this activity to clouds and using dedicated servers, it attracts the "RIGHT TO USE" phenomena.

And if contracts aren't carefully worded, these assets could be staring in your books as assets with a corresponding liability, thereby making the balance sheet unattractive to investors.

Well until the accountants do figure it out, its best to leave this lease up in the clouds

Additional disclosures on credit quality of financing receivables

With Non-performing assets for banks still rising for some of the US banks, the FASB issued further guidance requiring additional disclosure on credit quality of financing receivables.

“The global financial crisis highlighted the need for additional information about a company’s financial instruments, including loans and other financing receivables,” FASB Chairman Robert Herz said in FASB's press release

The additional disclosures required include:

1. Aging of past due receivables,
2. Credit quality indicators,
3. Nature and extent of troubled debt restructuring
4. Modifications of any troubled debt done in the past 12 months which have resulted in losses again, and
5. significant sale and purchases of receivables

While the intent of the update is primarily to give the readers an assessment of the nature of credit risk in an entity, how this credit risk is managed and what are the reasons for changes in allowance for receivables.

While points 1,4 and 5 are more a matter of subject of fact and can be easily reported, it will be interesting to see as to how will Companies represent credit quality indicators in point 2. There will be a varied choice of benchmarks which each Company will use to map the credit quality indicators.

Short-term accounts receivable, receivables measured at fair value or lower of cost or fair value, and debt securities are exempt from the ASU.

For public companies, the amendments that require disclosures as of the end of a reporting period are effective for periods ending on or after Dec. 15, 2010. The amendments that require disclosures about activity that occurs during a reporting period are effective for periods beginning on or after Dec. 15, 2010.

For nonpublic companies, the amendments are effective for periods ending on or after Dec. 15, 2011.