May 19, 2021

Industry Letter: Tangible Net Worth Calculation

To the Licensed Check Casher Addressed:

The Department of Financial Services has a longstanding policy that requires each licensed check casher to have $50,000 in tangible net worth for each licensed location.  This letter clarifies that policy in view of pending changes to generally accepted accounting principles (GAAP) on leases.

Tangible net worth is calculated as total assets less both total liabilities and intangible assets.  Intangible assets include but are not limited to goodwill, patents, copyrights, trademarks, logos, and noncompete agreements. 

Under GAAP’s Accounting Standards Update (ASU) 2016-02, as amended, for lease terms of more than twelve months both a right-of-use (ROU) asset (for the right to use the underlying asset) and a liability (for the obligation to make lease payments) must be recorded.  For the tangible net worth calculation, when an ROU asset arises due to the lease of a tangible asset (e.g. building or equipment), such ROU asset should be considered a tangible asset.  

ASU 2016-02, as amended, becomes effective for private companies for fiscal years beginning after December 15, 2021.  This industry letter is effective upon issuance.

Should you have questions, kindly contact the Department’s relationship manager for your entity.

 
Sincerely,

Wendy Henry
Deputy Superintendent | Banking
Licensed Financial Services