American Institute of Certified Public Accountants
1211 Avenue of the Americas, New York, New York 10036 (212) 575-6200
June 25, 1981
J.T. Ball, CPA
Financial Accounting Standards Board High Ridge Park Stamford, CT 06905
Enclosed for consideration by the Financial Accounting Standards Board is the accounting standards division's issues paper on "Accounting for Installment Lending Activities of Finance Companies." The AICPA Finance Companies Guide Committee prepared the paper as part of its project to revise and update the 1973 AICPA Industry Audit Guide, Audits of Finance Companies. The Accounting Standards Executive Committee (AcSEC) reviewed and approved the paper.
The paper addresses issues on
• methods of recognizing revenue, including nonrefundable fees,
• accounting for loan acquisition costs
• accounting for credit losses, and
• recognition of losses for anticipated revenue deficiencies.
It contains advisory conclusions on those issues as approved by both the committee and AcSEC.
The issues addressed are significant and merit early consideration by the Board. The Board's action on those issues will affect its project to extract the specialized accounting and reporting prin-ciples and practices for finance companies.
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Representatives of the division would be pleased to discuss the issues paper with you or other representatives of the Board at your convenience.
Accounting Standards Executive Committee
cc: Securities and Exchange Commission