Sale of Receivable

Question 1

Conditions for sale of receivable

Answer 1

1. the transfer of receivable is isolated from the transferor even in bankruptcy
2. Transferee has right to pledge or sell the assets
3. Transferor does not maintain control thru an agreement

Question 2

If conditions are not met for sale of receivable what happens?

Answer 2

It becomes a secured borrowing, record a liab and will have int exp

Question 3

Maker

Answer 3

entity that buys the notes

Question 4

Types of Transfers

Answer 4

Factoring (w/ or without recourse ), Assignment of AR, Pledging of AR

Question 5

Factoring of AR

Answer 5

receivables are immediately transferred to a transferee as part of the normal business transaction, with or without recourse ( can be a sale or loan)

Question 6

Factor

Answer 6

person buying AR

Question 7

Assignment of AR

Answer 7

Borrow money from entity and use specific AR as collateral

Question 8

Pledging of AR

Answer 8

borrow money using ALL AR as collateral

Question 9

Transferor

Answer 9

person selling note or AR

Question 10

Impaired Loan

Answer 10

when PV of the future Cfs expected to be collected (using original effective int rate) is less than carrying value