The Reporting of Executory Contracts.

Abstract The article discusses the proper method of disclosing all executory contracts into which a firm has entered. Such contracts, also known as future contractual commitments, are agreements between two or more parties in which no party has yet performed any of the acts required of him by the agreement. In accounting texts such agreements are usually illustrated by purchase commitments or lease agreements, transactions where the single most salient feature is usually considered to be one firm's potential cash obligation. When a firm enters into an agreement to receive service potentials of varying types in return for cash, another must agree to provide the service potentials at some future date in return for the promise to pay. This emphasizes the potential liability of the firm. All executory contractual commitments that are material ought to be disclosed wherever and whenever possible. Contingent assets, like, a significant backlog of unfilled orders, are as important to the shareholders of the firm receiving the order, as the contingent liability is to the investors of the firm ordering them. Both rather than just one facet of the transaction should be disclosed.