If a company adopts an accounts receivable factoring program, and accounts for the factoring as a sale of receivables, which of the following is true in the period the company starts the program (all else equal)?

Question

Quizplus · Accepted Answer

When a company adopts an accounts receivable factoring program and accounts for the factoring as a sale of receivables, it receives immediate cash from the sale of the receivables. Therefore, cash flow from operations may increase. The accounts receivable balance may decrease due to the sale of receivables. There is no need for a retroactive restatement as it is a change in accounting estimate, not accounting principle. The factoring arrangement does not necessarily need to be with a consolidated entity to qualify for sale accounting.

If a Company Adopts an Accounts Receivable Factoring Program, and Accounts