ACCA · Question 27 · Financial Instruments
SECTION B - CASE 3: FinServe Solutions
FinServe Solutions Co is a fintech payment processor. The year-end is 31 March 20X7.
On 1 January 20X7, FinServe factored $500,000 of its trade receivables to a bank. The bank paid FinServe $450,000 immediately. Under the terms of the agreement, FinServe must guarantee the bank against any default by the customers (with recourse).
How should this transaction be recorded in FinServe's financial statements?
Answer options:
Derecognize the receivables and recognize a loss on disposal of $50,000.
Keep the receivables on the balance sheet and recognize a liability of $450,000.
Derecognize $450,000 of receivables and keep $50,000 on the balance sheet.
Recognize the $450,000 as revenue.
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