Investment In FC Organizational Products

9 Months Ended

May 31, 2014

Investment In FC Organizational Products [Abstract]

Investment In FC Organizational Products

NOTE 9– INVESTMENT IN FC ORGANIZATIONAL PRODUCTS

We own a 19.5percent interest in FC Organizational Products (FCOP), an entity that purchased substantially all of our consumer solution business unit assets in fiscal 2008 for the purpose of expanding the sales of planners and related organizational products under a comprehensive licensing agreement.  During a previous period, we reconsidered whether FCOP was a variable interest entity as defined under FASC 810, and determined that FCOP was a variable interest entity.  We further determined that we are not the primary beneficiary of FCOP because we do not have the ability to direct the activities that most significantly impact FCOP’s economic performance, which primarily consist of the day-to-day sale of planning products and related accessories, and we do not have an obligation to absorb losses or the right to receive benefits from FCOP that could potentially be significant.  Our voting rights and management board representation approximate our ownership interest and we are unable to exercise control through voting interests or through other means.

We are required to account for our investment in FCOP using the equity method of accounting.  However, we have not recorded our share of FCOP’s losses in the accompanying condensed consolidated income statements because we have impaired and written off investment balancesin previous periods, as defined within the applicable accounting guidance, in excess of our share of FCOP’s losses through May31, 2014.

Our primary exposure related to FCOP is from amounts owed to us by FCOP.  We receive reimbursement from FCOP for certain operating costs and for working capital or other advances that we may make to FCOP.  We are not contractually required to make advances to FCOP, but we believe that this additional financing will improve our ability to collect amounts owed to us, including amounts previously impaired and written off.  The operations of FCOP are primarily financed by the sale of planning products and accessories in the normal course of business.

At May 31, 2014 and August 31, 2013, we had$5.6 million and $7.8 million receivable from FCOP, which are classified as components of current and long-term assets in our condensed consolidated balance sheets based on expected payment dates.  The long-term receivable has been discounted using a rate of 15 percent.  During the first three quarters of fiscal 2014, we received $3.9 million in cash from FCOP for payment of receivables.