Wiley GAAP: Practical Implementation Guide and Workbook

Chapter 27. PERSONAL FINANCIAL STATEMENTS (ASC 274)

INTRODUCTION

ASC 274 addresses the preparation and presentation of personal financial statements or, more specifically, financial statements of individuals or groups of related individuals (i.e., families). Personal financial statements generally are prepared to organize and plan an individual's financial affairs on a more formal basis. Specific purposes that might require the preparation of personal financial statements include the obtaining of credit, income tax planning, retirement planning, gift and estate planning, or public disclosure of financial affairs. Third-party recipients of personal financial statements use them in deciding whether to grant credit, in evaluating the financial condition of individuals, in assessing the financial affairs of public officials and candidates for public office, and for other purposes.

SCOPE

ASC 274 applies to all individuals and all groups of related individuals (families).

DEFINITIONS OF KEY TERMS

Estimated current amount of liabilities. Payables and other liabilities are to be presented at the discounted amounts of future cash to be paid. The interest rate used to discount the debt is the rate implicit in the transaction in which the debt was incurred. If, however, the debtor is able to repay the debt currently at a lower amount, the debt is to be presented at that reduced figure.

Estimated current value of an asset. The amount for which an item could be exchanged between a buyer and a seller, ...