Accounting for the pledging of accounts receivable as collateral for a loan requires:

Question

Quizplus · Accepted Answer

Pledging of accounts receivable as collateral for a loan is a significant event that needs to be disclosed in the financial statements. Hence, the correct choice is to disclose the arrangement in notes to the financial statements. Option A is incorrect because reporting the receivables net of the borrowed amount doesn't provide sufficient information about the arrangement. Option B is incorrect because pledging of receivables doesn't change their classification as current assets. Option D is incorrect because an event of this nature necessitates the disclosure of material facts.

Accounting for the Pledging of Accounts Receivable as Collateral for a Loan