Golden Gate Consulting Services

Golden Gate Consulting Services - Golden Gate Consulting...

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Golden Gate Consulting Services, LLP 536 Mission Street San Francisco, California 94105 October 2, 2011 Rod Hurd, Chief Administrator InnerConnections, Inc. 101 California Street, Suite 2800 San Francisco, California 94111 Dear Mr. Hurd: Golden Gate appreciates the opportunity to advise InnerConnections regarding this accounting matter. To ensure a complete understanding between us, we are stating the relevant information about the advice that we will be interpreting and the facts ICI’s management provided to us. In our meeting of September 15, you asked us to research on ICI’s Risk Management Team’s proposed certain risk transfer strategies relating to the proposed ADVANTAGE credit card program and the separately priced extended warranty contracts. Golden Gate agrees with ICI that the company should eliminate its exposure to credit and operational losses by transferring some of the risk of loss to third party financiers and insurers. Also to distinguish the financing of the transfer of the receivables and recognition of the sale of warranties between GAAP and IFRS, Golden Gate recommends the company finance their ADVANTAGE program through US GAAP as it recognizes the transfer of receivables as a true sale versus IFRS’ “secured borrowing” from IAS 39. In reaching this conclusion, we looked at the financials for the transfer of receivables at $500 appraisal and the $50 extended warranty transfer through the principles of GAAP and IFRS by performing the pro forma and net cash flow effects. In addition we reviewed the principles of the Principal versus Agent in relation to the “pass through” of the extend warranty from the original third party Extendible Corporation to Bermuda Insurance Corporation. FACTS
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Golden Gate Consulting Services - Golden Gate Consulting...

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