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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Finance Companies: Perspective and Issues

The unified AAG, Depository and Lending Institutions: Banks and Savings Institutions, Credit Unions, Finance Companies and Mortgage Companies, was issued in early 2004. Previously, GAAP for the finance industry was largely to be found in Audits of Finance Companies (AAG, 1999) and SOP 92‐3, Accounting for Foreclosed Assets.

Finance companies provide lending and financing services to consumers (consumer financing) and to business enterprises (commercial financing). Some financing companies engage solely in consumer or commercial financing activities; others engage in both types.

Manufacturers, retailers, wholesalers and other business enterprises may provide financing to encourage customers to buy their products or services. Such financing is known as captive financing activity and may be provided by those companies or affiliated companies. Although most companies originally financed only their own products and services, many have expanded their financing activities to include a wide variety of products and services sold by unaffiliated businesses.

Consumer financing activities include direct consumer loans, retail sales contracts, and insurance services.

Commercial financing enterprises often provide a wide range of services, including factoring arrangements, revolving loans, installment and term loans, floor plan loans, and lease financing.

SOP 01‐6, Accounting by Certain Entities (Including Entities with Trade Receivables) That Lend to ...

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