Preparation of Financial Statements

PURPOSE: This rule sets forth what financial statements are required with an application for a Missouri grain warehouse license, who may prepare the financial statements, how these financial statements shall be prepared and what assets may be disallowed for licensing purposes. (1) The following definitions shall apply to these rules: (A) Balance sheet—A statement of assets, liabilities and net worth; (B) Combined balance sheet—A statement that includes all business and personal assets, liabilities and net worth of an individual; (C) Director—The director of the Missouri Department of Agriculture or a designated representative; (D) Generally accepted accounting principles (GAAP)—The conventions, rules and procedures necessary to define accepted accounting practice, which include broad guidelines of general application as well as detailed practices and procedures generally accepted by the accounting profession and which have substantial authoritative support from the American Institute of Certified Public Accountants; (E) Personal balance sheet—A statement of personal assets, liabilities and net worth for an individual including the net equity of all business interests other than those for which an application is being made; (F) Certified public accountant—Any person permitted to engage in the practice of public accounting under Chapter 326, RSMo; (G) Qualified accountant—A certified public accountant competent in the application of GAAP provided that this person is not the applicant. Also, that if the applicant is an individual, this person is not an employee of the applicant, or if the applicant is a corporation or partnership, this person is not an officer, shareholder, partner or employee of the applicant; and (H) Statement of income and expenses—A statement showing the income and expenses of a particular entity for a given period of time. (2) All applicants for a Missouri grain warehouse license shall submit a balance sheet and a statement of income and expenses. The financial statements shall be no more than six (6) months old, unless waived by the director. If waived, the director may require interim financial statements as s/he deems necessary. The financial statements shall be prepared by a qualified accountant in accordance with these rules. If the applicant’s qualified accountant has prepared a statement of retained earnings, a statement of changes in financial position, and notes and disclosures to the financial statements, then these items shall also be submitted. (3) The applicant shall submit copies of the financial statements submitted to the applicant’s bonding company, or submitted to the Commodity Credit Corporation in support of a Uniform Grain Storage Agreement, or submitted to the United States Department of Agriculture in support of a federal warehouse license if the financial statements are prepared as of a different date, or for a different period of time, or to show different amounts than those submitted with the application for a Missouri grain warehouse license. (4) The financial statements required by these rules shall be prepared in accordance with GAAP except as otherwise allowed or required by these rules. (5) All financial statements required by these rules shall be prepared on the accrual basis of accounting unless waived by the director. If waived, the director may require the applicant to provide an estimate, prepared by the applicant’s qualified accountant, of the effect of converting the financial statements to the accrual basis of accounting. (6) If the applicant is an individual, the applicant shall submit a balance sheet and a statement of income and expenses for the proprietorship business in accordance with GAAP. If the applicant is an individual, the applicant also shall submit a personal balance sheet. The applicant, in lieu of submitting a business and a personal balance sheet, may submit a combined balance sheet. Personal nonbusiness assets should be shown at the lower of historical cost or estimated fair market value. If the applicant is an individual and desires to show estimated current values that are higher than the historical cost basis for the proprietorship business balance sheet, the personal balance sheet, or the combined balance sheet, the estimated current values should be accompanied by a qualified appraisal. If a qualified appraisal is accepted, appropriate adjustments to the balance sheet will be made by the Missouri Department of Agriculture. (7) If the applicant is a partnership, the applicant shall submit a balance sheet and a statement of income and expenses for the partnership business in accordance with GAAP. Only the partnership assets and liabilities will be considered in computing net worth. The personal financial statements for the individual partners will not be considered in computing net worth. (8) If the applicant is a partnership and desires to show estimated current values that are higher than the historical cost basis, the estimated current values should be accompanied by a qualified appraisal. If a qualified appraisal is accepted, appropriate adjustments to the balance sheet will be made by the Missouri Department of Agriculture. (9) If the applicant is a partnership, a copy of a written partnership agreement shall be submitted. (10) If the applicant is a corporation, the applicant shall submit a balance sheet and a statement of income and expenses for the corporation in accordance with GAAP. If the applicant is a corporation and desires to show estimated current values that are higher than the historical cost basis, the estimated current values should be accompanied by a qualified appraisal. If a qualified appraisal is accepted, appropriate adjustments to the balance sheet will be made by the Missouri Department of Agriculture. (11) If the applicant is a corporation and is a party of a majority- or wholly-owned corporate parent/subsidiary relationship, the applicant shall submit the financial statements required by these rules and the consolidated financial statements. For licensing purposes, the director may use the applicant’s net worth or the consolidated net worth. If the applicant is a wholly- or majority-owned subsidiary, the director may require the applicant to submit a corporate letter of guaranty from the parent company on a form prescribed by the director. (12) If the applicant is a corporation and is a part of a group of related corporations that do business with each other where the same individual or partnership owns a controlling interest in all of the corporations, the applicant shall submit the required financial statements for the applicant and the combined financial statements for the group of related corporations. (13) In determining allowable net worth for licensing purposes, the director shall disallow the following assets if s/he is of the opinion that these assets are withdrawals of equity or that these assets are uncollectible: 1) notes receivable due from stockholders, 2) accounts receivable, 3) advances to affiliates, 4) investments or equities in cooperatives or 5) goodwill. The director also may disallow other assets that in his/her opinion are or may be withdrawals of equity, or that are or may be uncollectible. AUTHORITY: sections 411.070 and 411.260, RSMo Supp. 1998.* Original rule filed Feb. 13, 1980, effective May 11, 1980. Amended: Filed March 16, 1988, effective June 27, 1988. Amended: Filed Oct. 25, 1999, effective June 30, 2000. *Original authority 411.070, RSMo 1941, amended 1955, 1965, 1977, 1980, 1986, 1993, 1995, 1997; and 411.260, RSMo 1939, amended 1941, 1949, 1965, 1977, 1986, 1997.