Circumstance;

	A company sells 25% of its ?inventory? for a down payment of .14% and
an agreement that an additional 2.4% will be paid in 2 years, at which
time the remaining
97.46 % due will be negotiated but is to be paid in full in a
remaining 8 year period of time. The buyer takes possession of the
?inventory? (to do with as he pleases) upon the seller?s receipt of
the second payment (also being the first of the 2 year period). The
sale is by irrevocable contract and the buyer is essentially financing
the purchase himself.


Question;

	Under generally accepted accounting practices how much of this sale
may the seller book into an audit ledger as an asset to the company in
the first and second year?

Well, first of all GAAP stands for Generally accepted accounting
principles, not practices.  Second of all, the seller is already
carrying the inventory as assets on their books.  Assets would
decrease as a result of the sale.  This would decrease as soon as the
seller transfers ownership of the inventory.  I believe your question
should be more along the lines of how much revenue can the seller book
in their income statement from the sale in the first and second year.
For a quick answer, the seller can not book revenue until they have
performed their end of the bargain.  The seller can not recognize the
revenue until they they are sure they will receive the money and until
they give the inventory to the buyer.  Your questions is very unclear
though to when the ownership transfers.  I can't tell if it happens in
year 1 or year 2.  If you can clarify this, I might be able to help
you more.

Unfortunately most questions worth asking do carry a complexity with
them. I posted a second question that really pertains to this one as
well.

The seller received $700,000 as a ?good faith? payment towards the
?irrevocable? contract for the purchase of 25% of the inventory of a
mining/milling company. The buyer (it is said) is waiting for
completion of an audit/assay to initiate the first of monthly payments
in the amount of $500,000 for 2 years. Upon the company?s receipt of
the first monthly payment (after the audit/assay report is completed)
the buyer takes full possession of $500,000,000 worth of ?inventory?.

What truly complicates the question, but which I am not as a part of
this query including (I have asked this question separately), is that
both the seller and buyer have agreeable assays of this ?inventory?
material. However; the former officers of the selling (contracting)
company?s preceding company incarnation has had litigation initiated
and a civil suit filed against them by the SEC that (among other
counts) claims the former company?s inventory to be valueless (this
however still being the same ?ore/inventory? of the company currently
under question ? the contractual ?seller?-- which is re-organizing
itself) because they failed to follow SEC guidelines in reporting
their assets (i.e. they claimed mineral resources as mineral reserves
without the required 3rd party independent assay report complete with
financial feasibility studies etc.). The company it appears has hit
upon a schemata to sell their ?inventory? ?as is? to a friendly buyer
as a means of defense in its civil suit to prove value may be
established by means other than the SEC guidelines (this statement is
a supposition on my part). It is further my supposition that if they
did fully comply with the SEC reporting guidelines for converting
mineral resources to mineral reserves;
(http://www.iom3.org/divisions/earth_sciences/SEC_Recommendations/Appendix3.pdf),
their reserves could be reported as an asset [(based on prevailing
commodity prices, less production costs to achieve ultimate ore
refinement). They only process from first stage ore to dore? bar form
a mix of precious metals. The final refinements would be done by
someone else.)]  So, Finally, what I am ultimately attempting to
determine is; Will selling ?inventory? basis the contractual agreement
allow them to claim valuation greater (or less than) if they were to
achieve the SEC?s blessing by rating their resources as reserves and
thereby (presumably) allowing them to enter their ?inventory/ (now
proven)ore-reserves? as an asset within their audit ledger?

Note: this is my first attempt to use the google answers format. I am
attempting the best way I know how to arrive at an answer to a very
important question to me. I would pay $20.00 to the answer of this
question if I knew how to increase the amount offered.

Raned,
Originally your questions could have be seen as homework, especially
with the small prices.  A Researcher only gets 75% of the price, not
much incentive.
You might consider raising the prices and also consider posting your
above comment  to the other question  - or a briefer summary that will
indicate that a specific situation is involved.
Good luck, Myoarin