Expert: Ed McFarland - 2/27/2006

Question
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Followup To
Question - Yes, I searched FASB too.  My controller wanted something in writing that referenced items on A/R with liens?  He did not want to write off the account and have repercussions.
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Followup To
Question - DO you know the pronouncement? or link i can use? I need to reference.
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Could you point me in the direction of a site or FASB pronouncement?

Followup To
Question -
Can a customer accounts receivable that is past due and has a mechanics lien, be written off?  I have searched and can not find anything related to GAAP relating to liens?
Answer -
I take it that this has been on the books for a long time. You can write it off and if ever comes in treat it as a special event.

Or if the issue is to accurately age your receivables, then you can create a special account and move it out. The footnotes in your financials will explain the lien.

Good luck
Answer -
It would be done through an adjustment of a/r reserves. The only thing special about this is the lien.

If the reality is that lien or no lien you are not going to paid, you treat it as you would any other bad debt. The lien gives you a chance, however slim of getting something.

Good luck
Answer -
I'm not aware of any specific reference for writing off a receivable that has a machenic's lien. I did search www.fasb.org but nothing to your situation.

My question to you is why you need a specific citation?

Answer
OK, I looked in a couple of other places as well. I can't figure what the problem would be if you write off the receivable. The fact you are discussing this makes me think that neither of you expect to collect.

If you do write it off, it won't change the status of the lien. If it should come in after you have written it off, you treat it as a special one time event.

I don't see what repercussions would be, you haven't done anything to dismiss the lien from any experience I've had. you could reclassify it as a bad debt to get it out of the aging.

If you haven't put it into collection, try that. My guess would be if they are experienced they can give some direction that their other clients have in dealing with the same thing.

Good luck