ACCA · Question 07 · Financial Instruments
Section A
FinTech Solutions factored $2 million of its trade receivables to a bank. The bank advanced $1.8 million immediately and charged a non-refundable fee of $50,000. Under the agreement, FinTech Solutions guarantees to reimburse the bank for any receivables that default (factoring with recourse).
How should FinTech Solutions account for this transaction in its statement of financial position?
Answer options:
Derecognize the receivables and recognize a loss on disposal of $250,000.
Keep the $2 million receivables on the statement of financial position and recognize a financial liability of $1.8 million.
Derecognize $1.8 million of receivables and retain $200,000 as a continuing involvement asset.
Recognize a net asset of $200,000 representing the remaining cash to be collected.
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