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

Question

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The pledging of accounts receivable as collateral for a loan requires disclosure of the arrangement in notes to the financial statements. The receivables should continue to be reported as current assets, but the disclosure is necessary for users to understand the potential impact on the company's liquidity if the receivables are not collected. Netting the receivables with the borrowed amount or reclassifying them as noncurrent investments is not appropriate.

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