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EXCEL - IDEA: XBRL DOCUMENT - RECEIVABLE ACQUISITION & MANAGEMENT CORPFinancial_Report.xls
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: FINANCE RECEIVABLES (Policies)
12 Months Ended
Sep. 30, 2012
Policies  
FINANCE RECEIVABLES

B.  FINANCE RECEIVABLES

 

The Company has adopted the provisions of Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 310-30 for its investment in finance receivables, “Accounting for Loans or Certain Debt Securities Acquired in a Transfer.” This SOP limits the yield that may be accreted (accretable yield) to the excess of the Company’s estimate of undiscounted expected principal, interest and other cash flows (cash flows expected at the acquisition to be collected) over the Company’s initial investment in the finance receivables.  Subsequent increases in cash flows expected to be collected are recognized prospectively through adjustment of the finance receivables yield over its remaining life. Decreases in cash flows expected to be collected are recognized as impairment to the finance receivable portfolios. The Company’s proprietary collections model is designed to track and adjust the yield and carrying value of the finance receivables based on the actual cash flows received in relation to the expected cash flows.

 

During the years ended September 30, 2012 and 2011, the Company neither acquired nor sold any finance receivables.

 

In the event that cash collections would be inadequate to amortize the carrying balance, an impairment charge would be taken with a corresponding write-off of the receivable balance. Accordingly, the Company does not maintain an allowance for credit losses.

 

The agreements to purchase the aforementioned receivables include general representations and warranties from the sellers covering account holder death or bankruptcy, and accounts settled or disputed prior to sale. The representation and warranty period permitting the return of these accounts from the Company to the seller is typically 90 to 180 days. Any funds received from the seller of finance receivables as a return of purchase price are referred to as buybacks. Buyback funds are simply applied against the finance receivable balance received. They are not included in the Company’s cash collections from operations nor are they included in the Company’s cash collections applied to principal amount. Gains on sale of finance receivables, representing the difference between sales price and the unamortized value of the finance receivables, are recognized when finance receivables are sold.

 

Changes in finance receivables for the years ended September 30, 2012 and 2011 were as follows:

 

.

2012

2011

 

 

 

Balance at beginning of year October 1,

$ 1,297

$ 57,341

Cash collections applied to principal

(1,297)

(56,044)

Receivable writedown

-

-

Balance at the end of the year

$ -

$ 1,297

Estimated Remaining Collections ("ERC")*

$ -

$ 1,297

 

*Estimated remaining collection refers to the sum of all future projected cash collections from acquired portfolios. ERC is not a balance sheet item, however, it is provided for informational purposes. Income recognized on finance receivables was $84,535 and $51,512 for the fiscal years ended September 30, 2012 and 2011, respectively.

 

Under ASC 310-30 debt security impairment is recognized only if the fair market value of the debt has declined below its amortized costs. Currently no amortized costs are below fair market value. Therefore, the Company has not recognized any impairment for the finance receivables.

 

Under ASC 310-30 debt security impairment is recognized only if the fair market value of the debt has declined below its amortized costs. The Company took impairment charges totaling approximately $0 during the years ended September 30, 2012 and 2011, respectively.