Classifying shareholder advances is one of the gray areas in financial reporting. When deciding whether to report advances as debt or equity, ask yourself the following questions: Does management intend to repay the loan? Can the company realistically repay it? Have market-rate terms been negotiated and followed? And how is the transaction classified for tax purposes? Shareholder advances present financial reporting challenges. We can help you address those challenges and adequately disclose these transactions in your financial statement footnotes.
