DISCLAIMER

The materials in this webpage are for reference only.

MH Business Services Company and the author are not responsible for the correctness of the content.

The readers holds their own responsibilities for the use of materials in this webpage.

Item 1: Deposits, fixed or at call in your books

Bank deposits:

1. Time deposits
2. Fixed deposits
3. Deposits at call with daily basis interest

Item 2: Saving accounts held in your books

1. Saving accounts

Item 3: Current account balances held in your books

1. Current accounts

Item 4: Facilities granted to us.

1. Banks will state the latest date of bank facilities.
2. Banks seldom enclose the banking facilities in the bank confirmations.
3. Banks do not state the orginal / oldest date of bank facilities.
4. Auditors should keep records of the bank facilities in chronological order.

Item 5: Loan amount debit balance (excluding loans in connection with Inward cargos) in your books

1. Loan amounts withdrawn under bank facilities. Interest calculated at of latest statements.
2. Should review the accrued interest expenses.
3. Financial statements' disclosure: (1) interest rate, (2) pledge of assets, guarantee given or received, (3) repayment terms

Item 6: Accounts closed during the year to confirmation date

1. Check to board minutes regarding board approval to close the accounts.
2. Review the last bank statement(s) of the closed account(s).

Item 7: Advances to Manufacturers and/or Packing Credits Account and/or Exports Loans granted Outstanding in your books

Advances to manufacturers

1. Short-term per-shipment financing for manufacturers who do not have sufficient fund to complete an order.
2. Function: to enable procurement of raw materials.

Packing credits accounts

1. Short-term pre-shipment financing, advance by time goods have been produced and packed for shipment.

Export loans

1. Short term post-shipment financing, usually with presence of invoices and shipping documents for banks.

Item 8 Acceptances Outstanding in your books

Bills receivable by you (banker)

1. Bills held by bank for goods imported.
2. Once bank releases documents held which will then pass title to importers, importers can obtain goods.
3. No interest within agreed term
4. Accounted as bills payable under current liabilities

Trust receipt (T/R)

1. Bank has a pledge on merchandise imported as a continuing security.
2. Importers agree to hold documents and goods in trust for sale.
3. Accounted as trust receipt loans under current liabilities.

Bills held by you (banker) for collection

1. Bills held by bank for goods imported, but does not involve L/C.
2. Bank acts as a middleman in collecting bills for importer.
3. Bank charge commission.
4. Account as trade creditors / account payable under current liabilities.

Item 9 Partial payments held by you

1. Occur when bank handles both outwards and inwards bills for same customers.
2. To reduce handling charges, importer ask bank to offset export bills receipts against import bills payments.
3. Accounted as bills payable under current liabilities

Item 10 Irrevocable Letters of Credit Outstanding in your books

1. Be non-utilized letter of credit line available to importers.
2. Generally no disclosure is required.

Item 11 Bills receivable by us (customer)

Bills purchased by you (banker)

1. Factoring or Discounted bills with recourse or non-recourse.
2. Exporters received settlement before bank receives fund from importers' bank.
3. Bank will charge a commission.
4. Account as factoring loan under current liabilities in books of exporter if it is with recourse.

Bills held by you (banker) for collection

1. Documentary collection - bills held by bank for good exported, excluding L/C.
2. Bank acts as a middleman in collecting bills for exporter.
3. Bank will charge a commission.
4. Bill receivables accounted as trade debtors under current assets.

Item 12 Marginal deposit held by you (banker)

1. Collateral in additionals to the receivables in Item 8, 10 abd 11.
2. Should disclose as Pledge of Assets or Collateral.

Item 13 Loans granted in connection with Inward Cargoes Outstanding in your (banker) books

1. Import loan.
2. Contrast to T/R loan, the bank does not obtain the title of goods of this type of import loan.
3. Account as bank loans under current liabilities.

Item 14 Guarantees

Shipping Guarantees

1. Written indemnity by bank to shipping company.
2. Allow importers to take possession of goods before presentation of bill of lading (B/L).
3. Redeem upon receipt of original B/L.
4. Contingent liability, but may be too remote for disclosure.

Letter of guarantee (L/G)

1. Undertaking from exporters to bank.
2. May consider as contingent liability.

Received by you (banker) on our behalf

1. Third parties issue guarantees addressed to banker for the company.
2. Third parties can be director, major shareholders, related corporates or other parties.
3. This are the personal guarantee or corporate guarantee.
4. Names are not disclosed in bank confirmation but in banking facilities.
5. Disclosure are required.

Item 15 Derivative Contracts

1. Exchange Rate Contracts.
2. Interest Rate Contracts.
3. Other derivative contracts/structured product contracts.
4. Fair value as of the reporting date should be accounted for.
5. Derivative Contracts usually be disclosured in a seperate line in balance sheet.

Item 16 Other direct or contingent liabilities

1. Disclosure may be required.

Item 17 Securities and other documents of title held by you (banker)

Against facilities granted

1. Obtain banking facility letter.
2. Consider disclosure requirement / check with relevant board minutes.

For safe custody

1. Items under bank's safe custody, like share certificates.
2. Provide evidence for existence and ownership of assets.
3. No additional disclosure unless these are pledged of assets.

Micheal Wong is the founder of MH Business Services Company. He is the core maintainer of the website of MHprofessionals. Currently, he is studying MSc in Computer Science in City University of Hong Kong.

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