Factoring involves selling customer receivables to a financial intermediary, which then collects payment directly from the customers. This strategy is commonly used to accelerate cash flow. This course offers a high-level overview of the accounting and reporting considerations for accounts receivable factoring, focusing on the criteria for determining whether the transfer qualifies as a "true sale" or should be accounted for as a secured borrowing.
Learning Objectives
Upon successful completion of this course, participants will be able to:
Identify the U.S. GAAP area applicable to factoringarrangements
List the specific conditions that must be met for a factoringarrangement to qualify as a sale
Recognize key evaluation considerations relating to true saleopinions
Recognize the accounting impacts from a factoring transaction
Major Topics
- Factoring Purposes
Factoring Considerations
Applicable U.S. GAAP
Sale Condition Requirements
Sale Condition #1
- Legal Isolation of the Assets
True Sale Opinion
Sale Condition #2
- Right to Pledge or Exchange
Sale Condition #3
- Effective Control
Factoring Arrangements That Qualify as a Sale
Re-Recognition Events
Factoring Arrangements Not Qualifying as a Sale
