TRADE ASSOCIATES

TRADE ASSOCIATES

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Related entity loans

  • The Qualified Accountant is to view the balance sheet (at a minimum) of the related entity, to determine collectability of the related entity asset loan owing to a licensee.
  • Evidence of collectability is by way of balance sheet or statement of financial position for related entity (not loan agreements).
  • For the loan to be considered collectible the related entity, at the same balance sheet date, must hold a net tangible asset position of at least $0 and have a current ratio of at least 1:1. 
  • In calculating the related entities net tangible asset position and current ratio, any disallowed or intangible assets must be excluded from the related entities financial position.  Disallowed assets are identified in Section 17 of the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018.
  • If directors owe money to the company as an asset, collectability of those loans also need to be determined.  The director would need a net tangible asset position of at least $0 and a current ratio of at least 1:1 for the loan to be considered collectible.
  • Repayment of a loan through the payment of future dividends from the Licensee is not evidence of collectability, as the payment of the dividend reduces the Licensees net tangible asset position by an equivalent amount.
  • Related entity liability loans cannot be deducted from the calculations of net tangible assets or current ratio under any circumstances.

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