When a company transfers receivables with recourse

Question

Quizplus · Accepted Answer

When a company transfers receivables with recourse, it means that the transferor has the responsibility to compensate the transferee for any uncollected receivables. This creates a contingent liability for the transferor, which must be disclosed in the notes to the financial statements as per GAAP requirements. Therefore, option A is the correct answer. Option B is incorrect because the transferee is not responsible for uncollected receivables. Option C is incorrect because there is a contingent liability that requires disclosure. Option D is incorrect because GAAP does provide specific reporting guidance for such transactions.

When a Company Transfers Receivables with Recourse