Client Money Question

[Tre-Lois]

Hi all

Company X maintains a distinct "Client Money" account designed to hold client funds. This account is subject to specific contractual agreements where it can be argued that these funds are not assets of X. (For those arguments we used the following which was referenced in another thread https://www.grantthornton.global/global ... oint-1.pdf)

However, clients are unable to directly deposit their funds into this dedicated Client Money account. Instead, they must initially deposit their funds into a corporate account owned by X. It is then X's responsibility to transfer these funds from the corporate account to the Client Money account on a daily basis, as mandated by their contractual obligations.

Given the brief commingling of these funds with other assets in the corporate account and X's responsibility for transferring them, does this situation imply that X exercises control over these funds? Consequently, does this scenario challenge the argument that these funds should not be recognized as assets of X?

[DJP]

It looks like X controls the account where those funds are deposited. Therefore, X will have to recognise those funds while they are sitting in the 'corporate account'.

[Marek Muc]

If the use of these funds is contractually predetermined and they are transferred to client accounts within a day, it seems there's no control or benefit for the corporation.

[Marek Muc]

I'm reconsidering my position Given that money is fungible, I agree with DJP's view. You should recognise these funds as cash for a day. The accounting would likely be DR Cash / CR Liabilities upon receipt, followed by DR Liabilities / CR Cash when routing them to client accounts.