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The Problem
Client contacts Eagle Rim and states that they have ~$2,000,000 in excess inventory. Further, they inform Eagle Rim that they believe the inventory currently has a cash liquidation value or "Market Value" of $700,000.
The Assessment
Eagle Rim, canvasses many of the potential buyers of this type of inventory by direct contact , industry relationships and through its network of experienced re-marketing professionals. Eagle Rim concludes that the $700,000 Market Value is in fact reasonable and formulates a solution to benefit The Client.
The Solution
The Client will sell the inventory to Eagle Rim in exchange for a $2,000,000 trade credit. The "Trade Credit" will function as a cash equivalent whereby one trade credit equals one dollar of cash. The Client has now in effect sold it's inventory for the Client's Book Value of $2,000,000 , not the $700,000 representing it's current Market Value.
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The Process
The Client now uses the $2,000,000 Trade Credit along with $6,000,000 in cash to buy the same $8,000,000 media schedule they had planned. That ratio of cash to credit – in this example 75/25 – is called "The Blend." The Client’s out-of-pocket net cash is reduced by $2,000,000 – the amount of the trade credit.
The Media
The media is guaranteed to be of the same quality and cost by having The Client’s Ad Agency approve and work alongside Eagle Rim Trading’s agency each and every step of the process. Our agencies, are among the leading Ad Agencies in the World which allows The Client to be assured and confident as to the quality and exact placement of The Client's Media Schedule.
The Accounting
From an accounting standpoint, the client recoups the potential loss on the inventory while reducing their cash outlay for the media buy by $2,000,000.*
*Authoritative accounting guidance in the United States for corporate-barter or trade-credit transactions is established within Emerging Issues Task Force Abstract 93-11 (EITF 93-11) and Accounting Principle Board Opinion No. 29 (APB 29) for accounting practices and sample entries related to corporate barter.
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Step 1 – ERT Buys Inventory
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Inventory Cost
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$2,000,000
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$2,000,000
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Liquidation Value
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$700,000
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$700,000
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Trade Credits Issued
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$0
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$2,000,000
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| Gain / (Loss) |
($1,300,000) |
$1,300,000 |
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Step 2 – Client Uses Trade Credit for Media Buy
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Media Buy (Net)
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$8,000,000
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$8,000,000
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Cash Outlay
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$8,000,000
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$6,000,000
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Trade Credits Used
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$0
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$2,000,000
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Net Cost of Media
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$8,000,000
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$6,700,000*
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| Gain / (Loss) |
($1,300,000) |
$1,300,000 |
*Media Cash Outlay [$6,000,000] + Liquidation Price [$700,000] = $6,700,000
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| Media Offerings |
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