Contingent Liabilities - The Art Of Disclosure On Your PFS

With all of the projects we have been working on lately the proper disclosure for our construction loans outstanding has become quite the challenge. We don't want to give a false impression of our current pipeline to lenders, but we don't want to scare them to death either. A lot of uncertainty about their "adjustment" procedure has made me think and rethink how to present things.

I have settled on the following:

1. Have a separate sheet for contingent liabilities that I hide and only send to lenders when they request it

2. Remove these contingent liabilities from the standard PFS submission

3. Once asked I present all of the nitty-gritty details about construction timelines, etc. along with balance of loans

My accountant informed me that people seldom send the contingent liabilities on the PFSes he sees. Only the stronger community lenders really seem to care about this much from what I have seen.

We have also started to report a range of net worth values to account for jobs in process this year. With 30 or so specs on the books accounting for in-process jobs really starts to matter a lot. I haven't heard any commentary from the lenders on this so I assume they just use our contributions, which is reported as our "conservative" number.