[Question] Accounting treatment of CC financial assistance

[BvN]

Hi all,

I'm wondering if anyone can be of assistance as I seem to have hit a blank.
How would I treat the financial assistance provided by a CC to a new member in terms of reporting?

The CC complied in terms of clause 40 of the Act but how will this appear on the Financial Statements? Will this be shown purely as a loan to member? In this instance the financial assistance provided was actual cash provided to purchase the membership, and not in terms of guarantees provided.

Thank you.

[Andromeda]

Hi BvN

Disclose it as a loan to the member.

I have recently had SARS assess in specie dividends because the client did not charge interest, even though the loan was firstly in credit for 7 months, then in debit for 5 then settled within the next 4 months. They also levied a 25% penalty.

If you use the SARS prescribed rate, which is based on the Public Finance Management Act, you should be ok. Presently (as from 01/07/2016) the prescribed rate is 10.5%

[BvN]

Thanks a lot Andromeda.

I also know that SARS is quite strict in terms of interest and will charge interest on this.

Regards.