Loan from Company Confirmation

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					Understanding the Standard Bank Confirmation

Item   Particular                                    Point to note
1      Dep osit, fixed or at call                    Pledge and Interest income
       Fixed deposits – Sums of money deposited      1.   Please note whether fixed deposit
       for fixed terms at fixed interest rate of          pledged is stated under item 16.
       interest.                                     2.   Interest income exempted if the
                                                          deposited pledge is in name of
                                                          company.


2 &3   Savings and current account                   Foreign currency
       Passbook or statement identification for      Multi-currency savings account – all
       the savings and current account is            interests income are tax exempt if the
       required. There are local and foreign         bank account is open in Hong Kong.
       currency savings and current a/c.


4      Loan Account debit balanc es (excluding       Mortgage Loan and Hire purchase
       loans in connection with inward cargo)        creditor
       Fixed sums advanced to the customer to        1. Loan repayment schedule for the
       be repaid by fixed periodical repayment            whole period with property
       at interest rates specified margin over the        secured and interest rate quoted.
       prime rate                                    2. Please note whether the property
                                                          pledged is stated under item 16.
5      Accounts closed during the year to            Obtain the last bank statement for the
       confirmation date                             closing account to ascertain the
                                                     account was closed
6      Advances to manufacturer and/or               Check point – acc ounting entry
       packing credit accounts and/or export         1.   The book entry is debit bank
       loans granted                                 account and credit the packing loan for
                                                     the advance usually 30 or 40% of the LC
       Packing loan –granted to an exporter as       amount.
       part of an arrangement involving a LC, and    2.   The loan will later be deducted
       is to enable the exporter to purchase raw     against proceeds of bills negotiated
       materials to manufacture merchandise.         under the L/C.
                                                     3.   Always find / Usual practice in
                                                     garment and electronic manufacturing
                                                     industry.
7    Acceptances Outstanding                       Check point – acc ounting entry
     a. Bills Receivable by banker                 1.   The book entry is debit Purchase
     -    Bills of exchange accepted by the        and credit to Bills payable upon the bill
          customer (importer) in favor of the      of exchange is accepted by customer as
          banker.                                  the goods imported to client. This kind
                                                   of bills settlement is normally under
     b. Goods released against trust respect       D/P i.e. Document against Payment.
          of (a)
     -    Bankers release document before the      2.   In the case when goods released
          maturity of a bill of exchange against   against trust receipt, the book entry is
          Trust Receipt but the customer is        debit Purchase and credit to Trust
          required to undertake to hold the        Receipt account.
          goods on behalf of the bank and to pay
          the proceeds of sale to the bank.        Purchase and Payment cycle
                                                   3. The exporter from foreign company
     c.   Bills held by banker for collection      e.g. USA exports goods to Hong Kong
     -    Bills of exchange accepted by the        client who is importer of the goods.
          customer (importer) in favor of the      However, the client is not obliged to
          supplier (exporter) who has given        pay unless the clients themselves
          instructions to the banker to collect    accept the bill of exchange (i.e. D/A -
          the proceeds on his behalf.              Document against Acceptance).


8.   Partial paymen t held by banker               Please refer to item 7 point to n ote
     This represents a partial settlement of the
     bills of exchange in item 7(a) or (b)


9.   Irrevocable letters of credit                 Irrevocable
                                                   The term irrevocable is significant as
     A letter of credit (L/C) is an instrument     the importer could not alter the letter
     issued by banker on behalf of customer,       of credit once the L/C has been issued
     (importer) authori zing the exporter to       to exporter.
     draw bills of exchange on the customer,       It is a contingent liabi lity of the client
     the banker or its corresponding banks for     as they are obliged to fulfill the terms
     the account of the exporter, under certain    of settlement when the conditions
     conditions stipulated in the credit.          stipulated in the L/C is met.
Understanding the Standard Bank Confirmation

Item   Particular                                  Point to note
10     Bills Receivable by customer                Terms of settlemen t under Letter of
       a.   Bills purchased by banker (and         Credit
            outstanding at confirmation date)      Usually the letter of credit has a D/P term
       -    Bills of exchange drawn on             mentioned the mode of payment made
            importer by the client (customer       after a specified period i.e. 30 days. Then,
            & exporter) and negotiated to          the client (i.e. customer) negotiates with
            banker i.e. instead of collecting it   the banker and sells it to the bankers so
            himself, the client (customer)         that the client could receive money in
            sells it to the banker who may         advance before the expired date.
            have recourse against the client
            (customer).                            However, If the client could not fulfill the
                                                   terms of letter of credit but the importer
       b.   Bills held by banker for collection    would settle the bill when the goods
       -    Bills of exchange drawn on             exported to the foreign importer, the
            importer by the client (customer       banker would act as agent for the client to
            & exporter) and sent to banker for     collect the bills from importer under the
            collection on behalf.    The banker    instruction of the client (i.e. exporter).
            acts as an agent only.


11     Marginal Deposit held by banker             Normally, the banker would request the
       a. On account of item 7                     client uses the property pledged as security
            (Acceptances outstanding) and          or deposit advance etc as a gurantee in
            item 9 (Irrevocable letter of          granting the bank facilities including letter
            credit)                                of credit and inwards bill acceptance
       b. On account of item 10 (Bills
            Receivable by customer)
       c.
12     Loans granted in connected with             Normally, the import loan granted is part
       inward cargo                                of the bank facilities. This loan, payable is
       Import loans are very common when           secured by the assets pledged to banker.
       the importer is required to pay at
       sight of shipping documents. It is a
       kind of loan arrangment.
Understanding the Standard Bank Confirmation

Item   Particular                                              Point to note
13     Guarantees                                              Performanc e Bond
       a. Given by a ba nker on behalf of client               a. Sometimes, the customer of
       i.    Shipping gurantees – Sometimes when a             the client company would
             shipment arrives via a short sea route, goods     request the client to place a
             may be released to the importer under a           Performance bond to the
             shipping gurantee given by the banker.            customer’s bank.
       ii.   Others – In lieu of giving a utility deposit by   The client then would request
       himself, the client may request the banker to           the banker to issue gurantee for
       issue a guarantee in favor of the utility               certain sum of money to the
       company.                                                customer.


       b. Received by a banker on behalf of client             b. The director may deposit or
       -     The director of the client company may            issue gurantee to the banker for
             issue a gurantee to the bank for the client’s     the company in granting bank
             company                                           facilities etc.


14     Foreign exchange contracts outstanding                  HKAS32 – Financial Instrument
       A forward foreign exchange contract is                  HKAS 21 – The effect of foreign
       sometimes used by ex porter/importer to hedge           exchange rate
       against risks of exchange rate fluctuations.

15     Other direct or contingent liablities to banker         Seldom happened in normal
                                                               manufacturing or trading
                                                               business.



16     Securities and other document of titles held            Important note
       by banker                                               1. We should have the banking
       a. Against facilities granted – Title deeds of          facilities letter to verfiy the
             property and motor car licence book etc           securities pledged and facilities
             used as security given to the banker for bank     granted.
             faciliies granted to the company..
       b. For safe custody – share certificate and             2. Disclosure in notes to financial
             time deposit held by the banker on behalf of      statement is required.
             the customer for safe custody purpose.

				
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Description: Loan from Company Confirmation document sample