Fasb Assignment

FASB Assignment

1. 1. Without recourse means that the buyer assumes the risk of bad debts.

2. For a transfer of receivables to be recognized as a sale, it must meet the following conditions: the receivables in question are out of the transferor’s reach, transferee’s right to pledge or exchange, the transferor does not have effective control of the receivables in question (Financial Accounting Standards Board, 2000 a). The specific citation that Samson would use is c. Effective Control

3. Cash                        360,000

    Loss on sale                 31,000

    Receivable from factor        9,000

        Accounts Receivable                400,000

4. A transfer is accounted for as a secured borrowing, not a sale, if and only if all the following conditions are met: the assets in question are the same as the assets transferred, the transferor can repurchase the assets on agreed terms, the agreement for repurchase is before maturity, and the agreement is entered at the same time with the transfer (FASB, 2000 b).

1. 860-10-40-5   [A transfer of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset in which the transferor surrenders control over those financial assets shall be accounted for as a sale [FAS  140, paragraph 9, sequence 89.1]]if and only if all of the following conditions are met:

a.  [Isolation of transferred financial assets. The transferred financial assets have been isolated from the transferor—put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership

b.  Transferee's rights to pledge or exchange.

c.  [Effective control. The transferor, its consolidated affiliates included in the financial statements being presented, or its agents do not maintain effective control over the transferred financial assets or third-party beneficial interests related to those transferred assets. A transferor’s effective control over the transferred financial assets includes, but is not limited to, any of the following: [FAS  140, paragraph 9, sequence 92.1] ] 

3.  [An agreement that permits the transferee to require the transferor to repurchase the transferred financial assets at a price that is so favorable to the transferee that it is probable that the transferee will require the transferor to repurchase them. [FAS  140, paragraph 9, sequence 92.2.2.1.3] ] 

860-10-40-24   [An agreement that both entitles and obligates the transferor to repurchase or redeem transferred financial assets from the transferee maintains the transferor’s effective control over those assets if all of the following conditions are met: [FAS  140, paragraph 47, sequence 250] ]

a.  [The financial assets to be repurchased or redeemed are the same or substantially the same as those transferred. [FAS  140, paragraph 47, sequence 251] ][To be substantially the same, the financial asset that was transferred and the financial asset that is to be repurchased or redeemed need to have all of the following characteristics: [FAS  140, paragraph 48, sequence 255] ] 

b.  [Subparagraph superseded by Accounting Standards Update No. 2011-03]. 

c.  [The agreement is to repurchase or redeem the financial assets before maturity, at a fixed or determinable price. [FAS  140, paragraph 47, sequence 253] ] 

d.  [The agreement is entered into contemporaneously with, or in contemplation of, the transfer. [FAS  140, paragraph 47, sequence 254] ] 

1.  1. Same as Part A- It is the same under IFRS as it is under FASB.

 2. The following conditions must be met for a transfer of receivables to be accounted for as a sale: the company transfers all necessary risks and/or rewards of ownership, the company retains the risks and/or rewards of ownership, or if neither of the first two conditions are true, then the entity determines control (International Financial Reporting Standards, 2010 a).