Recognition of a recourse liability will make a loss on sale of receivables larger than it would otherwise have been.

Question

Quizplus · Accepted Answer

When a recourse liability is recognized, it means that the seller of the receivables has agreed to bear some or all of the credit risk associated with those receivables. This increases the potential loss that could occur if the debtor defaults, and therefore makes the loss on the sale of the receivables larger than it would have been if there was no recourse liability.

Recognition of a Recourse Liability Will Make a Loss on Sale